Policy Combo Boosts Confidence, A-Share Valuation Set for Recovery

Recently,with the release of positive signals from the "combination punch" policies of the three major financial regulatory ministries,as well as the implementation of supporting policies such as guidelines for market value management and opinions on mergers and acquisitions,investor confidence has been significantly restored,and the A-share market has rebounded markedly,with a noticeable increase in short-term market activity.Since September 24th,the three major indices have closed sharply higher for three consecutive trading days,with the Shanghai Composite Index reclaiming the 3,000-point mark,and the A-share market transaction volume has also exceeded 900 billion yuan and one trillion yuan,setting a new high in four months.

Institutional insiders anticipate that additional policy measures are still expected to follow.At the same time,against the backdrop of policy intensification and improved overseas liquidity,the valuation center of the A-share market is expected to rise in the coming period.

The Shanghai Composite Index stands above 3,000 points

On September 26th,the A-share market continued its rebound trend.As of the close of trading that day,the Shanghai Composite Index strongly reclaimed the 3,000-point mark,closing at 3,000.95 points,up 3.61% for the day; the Shenzhen Component Index and the ChiNext Index rose by 4.44% and 4.42% respectively.The transaction volume of the A-share market once again broke through one trillion yuan.

In the two trading days prior,the A-share market witnessed a significant rebound.On September 24th,the Shanghai Composite Index soared by 4.15%,marking the largest single-day increase since July 2020.The Shenzhen Component Index,ChiNext Index,and the Beijing Stock Exchange 50 Index rose by 4.36%,5.54%,and 3.23% respectively,with over 5,100 stocks across the market closing higher.The transaction volume of the A-share market on that day exceeded 970 billion yuan,setting a new high in four months.

On September 25th,the three major indices closed higher again,with the Shanghai Composite Index,Shenzhen Component Index,and ChiNext Index all rising by more than 3% at one point during the trading session.As of the close of trading that day,the Shanghai Composite Index,Shenzhen Component Index,and ChiNext Index closed up by 1.16%,1.21%,and 1.62% respectively.The transaction volume of the A-share market on that day broke through one trillion yuan,continuing to increase compared to the previous trading day,marking the first time since May 6th.

In terms of industry sectors,during the two trading days of the 24th and 25th,all 31 of the first-level industry indices of Shenwan rose.The steel,non-bank finance,coal,and banking sectors led the industry gains over the two days,all rising by more than 8%.The large finance sector performed brightly,specifically,all 42 constituent stocks of the Shenwan Banking sector turned red,with nine stocks including Zhengzhou Bank,Huaxia Bank,and Shanghai Pudong Development Bank rising by more than 10% over the two days; in the non-bank sector,seven stocks including Minmetals Capital,Tianfeng Securities,and Guotai Junan Securities rose by about 20% over the two days,and 27 stocks including Ruida Futures,Oriental Fortune,Pacific Insurance,and New China Life Insurance rose by more than 10%.In addition,the Hong Kong insurance sector also showed a good upward trend.

Major policies in multiple fields release positive signals

On September 24th,at a press conference held by the State Council Information Office,the People's Bank of China,the State Administration of Financial Regulatory Affairs,and the China Securities Regulatory Commission announced a number of major policies that are about to be introduced,involving reserve requirement ratio cuts,interest rate reductions,reductions in existing mortgage loan interest rates,the creation of swaps for securities,funds,and insurance companies,the creation of stock repurchase and increase in re-lending,and the promotion of long-term capital entering the market,among other aspects.

At the press conference,CSRC Chairman Wu Qing stated that the CSRC will focus on "three highlights," namely,highlighting the enhancement of the inherent stability of the capital market,highlighting the service to the recovery and improvement of the real economy and high-quality economic development,and highlighting the protection of the legitimate rights and interests of small and medium investors.The CSRC will accelerate investment-side reforms,promote the construction of a "long money for long-term investment" policy system,focus on serving key areas such as new quality productive forces,take multiple measures to invigorate the mergers and acquisitions market,and resolutely crack down on illegal activities such as financial fraud and market manipulation."The three major financial regulatory commissions support high-quality development with a matrix-style combination of measures,focusing on the real economy,real estate market,and capital market with 'real money and silver' financial support and 'fundamental strengthening' institutional construction." The research team of CITIC Construction Investment stated that the reduction of reserve requirements and interest rates,along with the lowering of existing housing loan interest rates,promotes the release of long-term liquidity funds from banks,which is expected to stimulate an increase in consumer spending.The convergence of five real estate financial policies is exerting force,and it is still necessary to pay attention to the effectiveness and implementation of the policies; for the first time in history,the People's Bank of China has created monetary policy tools for the stock market,including swaps for non-bank financial institutions and re-lending for stock buybacks,providing strong support for the activity level and market performance of the capital market.

In addition,detailed measures related to mergers and acquisitions in the capital market and market value management have also been implemented,further helping to improve investor expectations.On the 24th,the China Securities Regulatory Commission (CSRC) issued the "Opinions on Deepening the Reform of the Listed Company M&A Market," which includes supporting listed companies to upgrade and transform in the direction of new quality productive forces,encouraging listed companies to strengthen industrial integration,further improving regulatory tolerance,enhancing the efficiency of reorganization market transactions,improving the service level of intermediary institutions,and strengthening regulation in accordance with the law.On the same day,the CSRC publicly solicited opinions on the "Guidance for Listed Companies No.10 - Market Value Management (Draft for Comments)," requiring companies that have been undervalued for a long time to disclose valuation enhancement plans,including objectives,time limits,and specific measures,and to provide special explanations on the implementation of the valuation enhancement plan during the annual performance explanation meeting.

"The CSRC has successively implemented guidelines for market value management and opinions on the merger and reorganization of listed companies,continuing the previous '1+N' policy philosophy of capital market reform.On the one hand,the documents focus on requirements for major index constituent companies and companies that have been undervalued for a long time,considering that the market value of companies that have been undervalued for a long time accounts for more than 20%,it is expected that the market value management actions of related companies will continue to accelerate; on the other hand,the documents focus on supporting directions such as new quality productive forces and industrial integration,and emphasize optimizing supporting policies such as payment and pricing tolerance." The research team of CITIC Securities stated.

Bohai Securities stated that the implementation of a series of measures has pointed out the direction of changes in the liquidity environment of A-shares in the future period,which has a positive effect on enhancing the valuation expectations of A-shares.

Looking forward to the future market,subsequent incremental measures can still be expected.Guo Lei,Chief Economist of Guangfa Securities,believes that there is still room for subsequent policies: in terms of real estate policies,first-tier cities have greater flexibility in further implementing city-specific policies; in terms of fiscal policies,the space includes accelerating the pace of existing policy resource implementation; in terms of consumption policies,support for service consumption can be expanded.

CITIC Securities believes that the cultivation and growth of patient capital are closely related to the development of new quality productive forces,which not only promotes the long-term sustainable development of the industry but also helps to stabilize the expectations of the capital market.It is expected that subsequent efforts will be made in three aspects: vigorously developing equity public funds,improving the "long money for long investment" institutional environment,and continuously improving the capital market ecosystem.

The market valuation center is expected to rise.

Against the background of further intensification of policies to stabilize growth and expectations,and the strengthening of expectations for interest rate cuts by the Federal Reserve,investment institutions generally believe that positive factors at home and abroad are accumulating.In the future period,market pessimism will be relieved,and the valuation center of the A-share market is expected to rise.

"In September,the A-share market turned to a marginal increase,and the rebound is expected to continue." China International Capital Corporation stated that on the one hand,the expectation of interest rate cuts by the Federal Reserve in September has risen,and global funds are expected to reallocate,which may be beneficial to Chinese assets.On the other hand,combined with the current economic and market environment,policies to stabilize growth and expectations are expected to further intensify.In this context,the emergence of positive policy signals is expected to boost investor sentiment,and the rebound is expected to continue,and the trend of stabilization still needs to pay attention to the subsequent changes in the fundamental expectations of listed companies.

Haitong Securities also stated that domestic policy efforts and the improvement of overseas liquidity may drive the rise of the stock market center.Recently,the A-share market has been at a large bottom area in terms of net breakage rate,risk premium,and stock-bond yield ratio,indicating that market risk preference and sentiment are already at a large bottom area.At present,the overseas liquidity environment has improved,and the superposition of positive factors at home and abroad may drive the rise of the A-share market index center.At the industry level,Chinese advantage manufacturing may become the main line in the medium term.Minsheng Securities' strategy team stated that when the expectation of the recovery of physical consumption meets the current combination of capital market policies,the market rebound will continue.The situation where the main assets of this year have been dragged down by market pessimism will be effectively alleviated,and the resonance among physical assets,central state-owned enterprises,and finance is even more worth looking forward to.In their view,the valuation repair of broad-based indices represented by the Shanghai Stock Exchange 50 and the CSI 300 has already begun.

Bohai Securities indicated that the liquidity of the future stock market is facing a reversal process,and the progress of policy implementation will affect the rhythm of market development.The A-share market will welcome a continuous repair of valuation under the joint promotion of regulatory authorities,financial institutions,and industrial capital.