Anatomy of the large cap market.

The markets in both regions finally breathed a sigh of relief with significant gains, with all three major A-share indexes rising by over 4%. The Shanghai Composite Index recorded its largest single-day surge since July 6, 2020. The trading volume in the Shanghai and Shenzhen markets today was 971.3 billion, an increase from the previous trading day's volume of 420.3 billion. Hong Kong stocks jumped by 4.13% with a trading volume of 242.4 billion, marking the largest trading volume in nearly two years.

Yesterday it was mentioned to pay attention to the press conference held by the State Council Information Office on Tuesday, September 24, 2024, at 9 a.m. Chinese People's Bank Governor Pan Gongsheng, Director of the National Financial Supervisory Authority Li Yunze, and Chairman of the China Securities Regulatory Commission Wu Qing will introduce the relevant situation of financial support for high-quality economic development and answer questions from reporters. The information released during the conference was substantial and brought many bullish factors, some of which exceeded expectations. This directly led to the surge in the exchange rates of RMB, with the offshore RMB exchange rate reaching a high of 7.028 on September 24, just a step away from reclaiming the 7.03 level, appreciating by over 300 points intraday. The FTSE China A50 index futures expanded by 5%.

Let's first look at the routine bullish factors. 1. The reserve requirement ratio will be reduced by 0.5 percentage points in the near future, providing about 1 trillion yuan of long-term liquidity to the financial market. 2. In the real estate sector, a reduction in existing house loan interest rates, and the unified lowest down payment ratio for house loans. This guides commercial banks to lower existing house loan interest rates to near new house loan interest rates, with an average expected decrease of about 0.5 percentage points. The national minimum down payment ratio for second house purchases will be reduced from 25% to 15%, unifying the minimum down payment ratios for first and second house loans. After the 50-basis-point reduction in existing house loan interest rates, a 30-year loan of 1 million yuan will decrease by 0.1 million yuan. This will have a certain stimulating effect on real estate sales. Real estate companies such as R&F Properties (02777), Sunac (01918), LVGEM China (00095) have all risen by over 13%. With the expected easing of reserve requirements and strengthening in the real estate market, bank shares have also benefited, with CM Bank (03968) rising sharply by 10.82%. 3. Six measures will be released to promote the entry of medium and long-term funds into the market and promote mergers and reorganizations. Improving the institutional environment for long-term investment, supporting qualified insurance institutions to establish private equity securities investment funds. This is a significant positive for insurance companies. Funds have already been strategically positioned in insurance stocks as mentioned yesterday, with China Pacific Insurance (02601) showing outstanding performance today.

Another unexpected move is the People's Bank of China's first creation of a structural currency policy tool to support the capital market. Supporting qualified securities, funds, and insurance companies to use their own bonds, stock ETFs, and CSI 300 component stocks as collateral, exchanging them for high-liquidity assets such as national bonds and central bank bills. This policy will significantly enhance the funding and stock holding of relevant institutions. Institutions can only use the funds obtained through this tool to invest in the stock market. The initial swap has a scale of 500 billion yuan. As long as this is done well, the scale can be expanded as needed in the future. The principle behind this is indirectly providing funds to securities firms. For large brokerage firms, such as citic sec (06030) and china galaxy (06881), they have all risen by over 10%.

Additionally, the establishment of a stock buyback and increase stake refinancing facility, with an initial 300 billion that can be increased later, at an interest rate of 1.75%. This policy is quite powerful, as many listed companies will actively increase stake buybacks, because the interest rate is so favorable that they can easily recoup the costs with even a slight increase. The impressive part is that it will guide many large off-market funds to enter the market alongside listed companies.

Another thing worth looking forward to is the stabilization fund under research. This should belong to the bottoming out, if so many bullish news still can't drive the market, it's better to have the stabilization fund directly enter the market, it's been said very straightforwardly.

With the introduction of favorable policies, in addition to significant outbreaks in the large financial sector, the market's high expectations are in the large consumer sector. Recently, Kweichow Moutai (600519.SH) announced that the company plans to implement a share buyback plan with 3-6 billion yuan with its own funds, the repurchase price not exceeding 1795.78 yuan/share. The repurchased shares will be used for cancellation and reduction of the company's registered capital. This is also the first time Kweichow Moutai has implemented a buyback in its 23 years of listing. On September 23, Wuliangye (000858.SZ) stated on the interactive platform that they are actively studying share buybacks or special dividends. In the Hong Kong stock market, liquor stocks mainly feature JENJiu Lidu (06979), which surged over 10% today, while beer-related stocks China Resources Beer (00291) and Tsingtao Brewery (00168) both saw increases of over 7%. The dining sector is the most direct reflection of consumption, with Jiumaojiu (09922) soaring nearly 15%, Naixue's Tea (02150), Haidilao (06862) all rising over 9%.

Automobiles, as the second largest consumer sector after real estate, are also the focus of intensive capital deployment. Despite various tariff bearish factors, competitive advantages cannot be stifled by certain bearish policies, such as the US introducing the policy of banning Chinese software and hardware for networked and autonomous vehicles driving on US roads. The current speculation logic is based on sales volume, such as the data released by Li Auto (02015), in the 38th week of 2024 (September 16-22), Li Auto's weekly sales volume reached 0.012 million vehicles. It surged over 10% today. In addition, the sub-brand L60 of Nio (09866) was listed last week, opting for battery leasing and priced at only 1.499 million yuan, extremely competitive with Tesla's Model Y price. Current feedback on orders is good. Upstream lithium salt companies were also boosted, with Ganfeng Lithium (01772) and Tianqi Lithium Corporation (09696) both seeing increases of 8%.

The overall market rose today, but there were also significant declines, such as Miniso (09896), the company announced a successful acquisition of 29.4% equity in Yonghui Superstores for about 6.3 billion RMB at a high price. This resulted in Yonghui Superstores' A shares hitting the limit, while Miniso plummeted by 23.86%. The reason is that substantial investments do not necessarily bring strong synergies. After Pinduoduo's adjustments, Yonghui may not necessarily bring the expected returns, and the funds for this acquisition are most likely to be raised from the market. This incident, however, has boosted Sun Art Retail (06808), with same-store sales turning positive from April to August. They are following the membership store model of Costco and Sam's Club, which is relatively reliable in current offline retail, as prices can be compared with online and shopping experience and service are better than online. It surged by 16.78% today.

With so many bullish factors, a direct signal of counterattack has been issued. It is estimated that foreign capital will continue to be attracted to enter the market. In addition to major finance, the main focus is on sectors with increase stake & buy back at the bottom and csi consumer 360 index.

Sector Focus

The State Council Information Office held a press conference this morning at 9 a.m., where the Chairman of the China Securities Regulatory Commission, Xiao Yuanqi, stated, 'The (market cap management) guidelines require long-term companies with a market cap below par value to develop value enhancement plans, evaluate the effectiveness of implementation, and require public disclosure.'

Looking at the fundamentals, in August, domestic steel production saw a significant year-on-year decrease, and by mid-September, social steel inventories continued to decline. Pre-holiday downstream inventory replenishment drove demand, showing signs of marginal improvement in the industry's supply-demand relationship. In terms of exports, from January to August 2024, cumulative steel exports reached 70.58 million tons, a 20.60% year-on-year increase, maintaining a good export level.

In the afternoon, major black commodities such as rebar rose across the board, with price increases significantly higher than other internationally priced futures. As of the close, the main 2501 contract for rebar rose by 3.21%, and the main 2501 contract for hot-rolled coil rose by 3.48%.

Steel stocks are the stronghold of stocks trading below net assets per share ('pobai'). As of September 10 this year, over 60% of steel stocks have fallen below net assets per share, making the characteristics of low stock prices and undervaluation in this sector very apparent.

Main stocks in Hong Kong include Maanshan Iron (00323), Angang Steel (00347), and Chongqing Iron (01053).

CRRC Corporation (01766): Inclusion in the FTSE China A50 Index, New signings maintain steady growth trend

Jitu Express-W (01519): Signs a memorandum of understanding on logistics services with Saudi Jubeil and Yanbu Royal, continuously expanding advantages in Southeast Asia.

Jitu Express recently announced the signing of a memorandum of understanding on logistics services with Saudi Jubeil and Yanbu Royal Commission, formalizing a partnership to jointly promote logistics and supply chain development in Saudi Arabia. The two parties will deepen cooperation within the economic zones under the jurisdiction of Jubeil and Yanbu Royal Commission, leveraging Jitu's technology and experience in express logistics to empower the logistics infrastructure construction in the economic zones, attracting more e-commerce and logistics industries to the local layout.

Review: This signing of the logistics service memorandum with Saudi Jubeil and Yanbu Royal Commission indicates another level of enhancement in the company's layout in the Middle East. In addition, on May 8, Jitu Express J&T Express announced the completion of a significant milestone, with Easy Capital and Middle Eastern consortium injecting tens of millions of dollars in capital. It is evident that the Middle Eastern consortium has confidence in the company. In terms of interim results, the revenue was 4.86 billion USD, a 20.6% year-on-year growth; the group's net profit reached 0.03 billion USD, turning a loss into a profit for the first time. In terms of market share, in the first half of 2024, the company's market share in Southeast Asia was 27.4%, up 2.0 percentage points from 25.4% in 2023; in China, the market share was 11.0%, up 1.1 percentage points from a comparable 9.9% in the first half of 2023; in new markets, the market share was 6.1%, up 0.1 percentage points from 6.0% in 2023. Overall, the company's advantage in the Southeast Asian region is expanding. In China, the scale effect of logistics infrastructure that had a high initial input is gradually emerging, and while the single ticket revenue in China remained relatively stable in the first half of this year, the decrease in single ticket costs has significantly boosted the profitability of domestic operations.