In today's brokerage morning meeting, China International Capital Corporation stated that it has postponed the Federal Reserve's interest rate cut prediction to the fourth quarter; Caitong believes that the reserve requirement ratio reform has already begun; HTSC emphasized the importance of the new logic of Bank allocation under Fund reform.
On May 16, Financial Association reported that the market experienced fluctuations and adjustments yesterday, with the Chinext Price Index leading the decline. The total trading volume in the Shanghai and Shenzhen markets was 1.15 trillion, a decrease of 164.3 billion compared to the previous trading day. In terms of sectors, synthetic biology, food, Special Treat sectors, and ports saw significant gains, while Software Development, cross-border payment, computing power, and Harmony Concept sectors faced notable declines. By the close yesterday, the Shanghai Index fell by 0.68%, the Shenzhen Component Index dropped by 1.62%, and the Chinext Price Index decreased by 1.91%.
In today's brokerage morning meeting, China International Capital Corporation stated that it has postponed the Federal Reserve's interest rate cut prediction to the fourth quarter; Caitong believes that the reserve requirement ratio reform has already begun; HTSC emphasized the importance of the new logic of Bank allocation under Fund reform.
China International Capital Corporation: Delays the prediction for the Federal Reserve's interest rate cut until the fourth quarter.
China International Capital Corporation pointed out that after the Sino-US Geneva talks, the two sides significantly reduced tariffs, lowering the risk of a recession in the USA. However, the effective tax rate of 15.5% is still significantly higher than last year's 2.4%, and the inflation risk has not been completely resolved. Historical experience indicates that price increases generally occur 2-3 months after the implementation of tariffs, and the latest inflation data cannot yet reflect this. China International Capital Corporation believes that the easing of tariffs will reduce the Federal Reserve's concerns regarding employment (and recession), thus emphasizing inflation risks. This suggests that the Federal Reserve may continue to observe and wait for clearer inflation data. The forecast for the timing of the interest rate cut by the Federal Reserve has been delayed to the fourth quarter (previously third quarter), with the expectation that the rate cut within the year will be less than 50 basis points.
Caitong: The reform of the reserve requirement ratio has already begun.
Caitong stated that on May 7, the central bank announced that "phase-wise adjustments to the reserve requirements of auto finance companies and financial leasing companies will be reduced to 0%", marking the official start of the reserve requirement ratio reform. Under the monetary policy framework of structural liquidity shortages, the expansion of commercial banks' balance sheets will increase the demand for reserve requirements, and the reduction of the reserve requirement ratio is a trend that is bound to happen, gradually approaching the implicit lower limit of 5%. Therefore, the central bank has prioritized reserve reform. For the bond market, the reserve requirement ratio reform is bullish, indicating a widening space for monetary policy, and accompanied by further declines in the reserve requirement ratio, with both micro contraction and fiscal expansion coexisting, the focus of monetary injection in the medium to long term may gradually shift towards buying and selling government bonds and monetization. However, in the short term, the tone of "moderate" and "opportune" still prevails, so Caitong believes that bond market rates will generally maintain a trend of fluctuating downward.
HTSC: Emphasizing the new logic of Banks allocation under Fund reform.
HTSC believes that the implementation of public offering reforms is expected to drive the valuation of the Banks Sector. The CSRC recently released the "Action Plan for Promoting High-Quality Development of Public Funds," significantly strengthening the constraints of performance benchmarks, and it is expected that future Fund allocations may converge towards performance benchmarks. In the first quarter of 2025, actively managed equity funds are under-allocated to Banks, deviating from the Csi 300 Index by nearly 10 percentage points, and with the driving force of reforms, there may be significant reallocation space. Recently, a package of policies has been implemented to drive economic recovery, additionally, passive Funds are continuously expanding, insurance capital is accelerating entry into the market, and sustained Inflow of incremental funds is expected, which may further support the Sector's market performance. Stock focus: 1) Publicly offered shares of commercial banks that are under-allocated in the first quarter of 2025; 2) Stable large banks still have allocation value; 3) High-quality individual stocks.
