A-Share Market Targets Record Highs; 4 Key Investment Opportunities to Watch

Under the catalysis of a series of favorable policies such as reserve requirement ratio cuts,interest rate reductions,and liquidity support for share buybacks,since September 25th,the daily turnover of A-shares has continuously exceeded one trillion yuan,with the index volume surging and prices rising,showing a trend of both volume and price increasing.

Industry insiders believe that the signal to vigorously revitalize the economy is very strong,and the trends of A-shares and Hong Kong stocks are expected to reach a higher level,with the main indices of the A-share market expected to challenge the annual high points in May.

Market confidence has been effectively boosted,and the transaction scale has returned to over one trillion yuan.

Following the Federal Reserve's release of the September interest rate statement on the early morning of September 19th,which lowered the target range of the federal funds rate by 50 basis points,on September 24th,People's Bank of China Governor Pan Gongsheng also announced several major news at a press conference held by the State Council Information Office,including the recent reduction of the reserve requirement ratio by 0.5 percentage points,and the possibility of further reducing the reserve requirement ratio based on market liquidity conditions within the year; lowering the central bank's policy interest rate,and reducing the 7-day reverse repurchase operation interest rate by 0.2 percentage points.

Under the catalysis of multiple favorable news,the Shanghai Composite Index surged by more than one hundred points on September 24th,with a 4.15% increase,marking the largest single-day closing increase in nearly four years (see Figure 1).The transaction scale of the entire market also surged to 974.423 billion yuan,an increase of 394.835 billion yuan from the previous day,and then continued to exceed one trillion yuan for three consecutive trading days,reaching 1455.627 billion yuan on September 27th.

CITIC Securities believes that from an external perspective,after the Fed's rate cut,the interest rate differential between China and the U.S.has gradually narrowed,and the overall strengthening of the renminbi exchange rate has eased the constraints on monetary easing for the stable exchange rate target,leaving more room for China's rate cuts.

Wang Qing,Chief Macro Analyst at Orient Gold & Credit,judged that the central bank's announcement of interest rate cuts and reserve requirement ratio reductions will play an important role in boosting the overall demand of the macroeconomy.On the one hand,the reduction of financing costs will directly stimulate consumption and investment demand,effectively play a counter-cyclical regulatory role,and promote the improvement of economic growth momentum; at the same time,it will also alleviate the current macroeconomic situation of "strong supply and weak demand" and promote a moderate rebound in price levels.On the other hand,after the central bank's policy combination punch,it will effectively boost market confidence and improve social expectations.At this stage,this is of great significance for stabilizing growth and the real estate market,and achieving the economic growth target of "around 5.0%" set at the beginning of the year.

On September 26th,the Political Bureau of the CPC Central Committee held a meeting,pointing out the need to respond to public concerns,adjust housing purchase restrictions,reduce the interest rates on existing mortgages,and urgently improve policies on land,finance,and finance to promote the construction of a new model of real estate development.Efforts should be made to boost the capital market,vigorously guide medium and long-term funds into the market,and unblock the capital market for social security,insurance,and financial management.Support for mergers and acquisitions of listed companies,steady progress in the reform of public funds,and the study and introduction of policy measures to protect small and medium investors.

In response,Chen Guo,Chief Strategy Officer of CITIC Construction Investment Securities,wrote that the signal of this meeting to vigorously revitalize the economy is very strong,and it also specifically mentioned efforts to boost the capital market,which is inspiring and constitutes a double benefit for profits and valuations for the stock market.It is expected that the trends of A-shares and Hong Kong stocks will both reach a higher level,and the judgment that the main indices of the A-share market are expected to challenge the annual high points in May is maintained.Policy Delivers Multiple Benefits

Focus on Four Major Opportunities

Against the backdrop of the introduction of significant favorable policies and the emergence of a long bullish trend,the most concerning question for everyone is whether the index has bottomed out and whether the market will start from here.

Financial influencer @Guo Yiming believes that the policy bottom is quite clear.After the Federal Reserve's interest rate cut,the room for domestic monetary policy easing has opened up.RRR cuts and interest rate reductions can provide liquidity to the market,stimulating and boosting the stock market.The realization of the expectations for this RRR cut and interest rate reduction is self-evident for the stock market.More importantly,the special mention of "creating new policy tools to support the development of the stock market" indicates the central bank's clear support for the development of the stock market.For A-shares,both in terms of overall valuation levels and cash dividend return rates,they have entered the value investment area,and investors can gradually start strategic allocation.

Hualong Securities stated that the policy delivers multiple benefits,and the market opportunities can be actively grasped.Four major investment opportunities can be specifically focused on:

Firstly,there are investment opportunities in the growth sector,including fields with significant scientific and technological innovation attributes such as electronics,TMT,and mechanical equipment.Policies focus on high-quality development,establish scientific innovation and technical transformation re-lending,and increase financial support for scientific innovation and equipment updates and transformations.Capital market reforms emphasize serving technology companies and support the development of venture capital.Policies provide financial support for the development of sci-tech innovation enterprises,which is conducive to reducing corporate financing costs and accelerating the growth of sci-tech innovation enterprises.

Secondly,there are investment opportunities in the large consumption and real estate chain sectors,including automobiles,home appliances,construction materials,etc.The central bank's policy on promoting the healthy development of the real estate market will introduce further policy measures,namely reducing the interest rates on existing mortgages and unifying the minimum down payment ratio for mortgages.The policy helps to reduce mortgage expenses,promote the expansion of consumption and investment,and related industries are expected to benefit.

Thirdly,there are opportunities in the financial sector.Policies that create new monetary policy tools to support the stable development of the stock market,promote the expansion of the scope of equity investment pilot programs for financial asset investment companies,facilitate the circulation of "raising,investing,managing,and exiting" for private equity venture capital funds,and promote the high-quality development of the insurance industry are expected to enhance investment opportunities in the financial industry.

Fourthly,monetary policy RRR cuts and interest rate reductions support the real economy and high-quality development,stabilize economic growth expectations,and,combined with the Federal Reserve's interest rate reduction cycle,historically outperforming industries such as pharmaceuticals and biotechnology,and power equipment sectors.

Domestic and foreign long-term funds continue to lay out their strategies.In addition to policy support,the characteristic of long-term capital's contrarian layout this year is also very obvious.

On the evening of September 17,State Development & Investment Corporation Limited (SDIC) Power announced that it plans to issue shares to the National Council for Social Security Fund to raise no more than 7 billion yuan,introducing strategic investors.On July 11,China National Nuclear Corporation (CNNC) announced that it plans to issue shares to the Social Security Fund to raise 12 billion yuan,which is also the Social Security Fund's first attempt to increase shares through a private placement.Regarding the introduction of the Social Security Fund as a strategic investor,SDIC Power stated that this is a pioneering practice to support medium and long-term capital entering the market,and it is also an important measure to implement the State Council's requirements to improve the quality of listed companies.In this regard,

In addition to the Social Security Fund,as a typical representative of the "national team",this year,Central Huijin Investment Limited Company has also increased its holdings through ETFs in a big way,laying out against the cycle.According to Wind data statistics,as of the end of the second quarter of this year,Central Huijin Investment Limited Company held a total of 223.206 billion ETF shares,an increase of 135.588 billion shares compared to the end of 2023,with a total ETF market value of 570 billion yuan.

Patient capital insurance funds have also steadily increased their equity allocation this year.According to data from the State Financial Regulatory Administration,as of the end of the second quarter of this year,the balance of insurance company funds used reached 30.87 trillion yuan,of which property insurance companies and life insurance companies used a total of 208 billion yuan for stock investment,an increase of 13.6856 billion yuan compared to the end of 2023,an increase of 7.05%; the funds used for investment in securities investment funds totaled 170 billion yuan,an increase of 16.9368 billion yuan compared to the end of 2023,an increase of 11.04%.

Not only domestic capital is accelerating its layout,but foreign institutions are also continuously "supporting" A-shares.Data from the China Securities Regulatory Commission (CSRC) website shows that in the first 8 months of this year,50 foreign institutions were approved for Qualified Foreign Institutional Investor (QFII) status,and the number of QFII has reached 848.At the same time,Shanghai Pudong Development Bank Fund,UK asset management giant M&G Investments,and US Golden Harvest Fund have successively announced the launch of China stock-related products,demonstrating the confidence of foreign institutions in the Chinese market and预示着 that there may be a large-scale capital inflow into the A-share market in the future.