Financial Policy Boosts Growth: ChiNext Up 7% in Two Days
**Financial Policy "Punch" Takes Effect, ChiNext Index Rises Over 7% in Two Days**
Recently, authorities have introduced a suite of financial policies including reserve requirement ratio cuts, interest rate reductions, stabilizing real estate, and stabilizing the stock market. Following the announcement of these policies, the capital market has responded strongly, with the Shanghai Composite Index and the ChiNext Index rising by 5.36% and 7.25% respectively from September 24th to September 25th.
Several industry insiders have stated that this "punch" of financial policies is of great significance in supporting the real economy and boosting confidence in the capital market.
**Highlight 1: Boosting Market Confidence**
Conducive to High-Quality Economic Development
Zhao Xijun, Deputy Dean of the School of Finance at Renmin University of China, said that the suite of financial policies released by the State Council Information Office helps to consolidate the momentum of economic recovery and boost market confidence. "The capital market has also responded positively in the past two days. It is evident that the policies have had an immediate effect. Moreover, the three financial regulatory authorities have maintained a high degree of consistency in monetary and financial policies, with strong targeting and precise policy implementation, which is also conducive to the stable development of the market."
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Zhao Xijun believes that China's economy has great potential. As a market with 1.4 billion consumers, the per capita GDP is significantly lower than that of developed countries, which means there is room for economic growth. Currently, institutional design, policy orientation, and market construction are crucial, and it is necessary to mobilize the creativity, initiative, and enthusiasm of various market entities to help the economy and the capital market achieve high-quality development.
"The policy punch released by the State Council Information Office this time exceeded expectations and is highly targeted and innovative, which is of great positive significance for the stability and development of the economy," said Yao Yudong, Deputy General Manager and Chief Economist of Dacheng Fund. He believes that the series of policies play an important role in stabilizing economic growth, promoting consumption, and supporting the development of the real economy. The comprehensive effect of these policies will help to enhance the confidence of market entities, stimulate market vitality, and promote the economy to emerge from the trough as soon as possible, achieving high-quality development.
China Galaxy Macro stated that the intensity of this policy exceeded expectations and is within the target category of high-quality development. The purpose is to address short-term economic downward pressure, stabilize expectations, prevent risks, and win a more abundant time window for the conversion of old and new drivers.
The institution believes that the logical mainline of this policy can be sorted into three threads: first, it pays more attention to the wealth effect of residents and protects asset prices, giving more attention to the real estate market and the stock market. Second, it pays more attention to risk prevention and resolution, with a higher focus on the decline in the real estate market. Third, it focuses on implementing policies that promote consumption as the main means of expanding domestic demand. Reducing the interest rates on existing housing loans can alleviate the pressure of interest payments, enhance purchasing power, stabilize asset prices, increase the wealth effect of residents, and boost consumer confidence.Key Point 2: Joint Efforts by Multiple Institutions
The capital market is set to welcome more long-term funds.
In terms of policies to stabilize the stock market, the central bank has created two brand-new monetary policy tools to support the capital market; the China Securities Regulatory Commission (CSRC) has proposed further support for long-term funds to enter the market and encourages mergers and acquisitions. At the Financial Regulatory Authority level, financial asset investment companies have become a "new handle" for the banking system to support venture capital investments.
Yuekai Zhiheng Macro Analysis suggests that on one hand, the central bank has introduced the "Securities Fund Insurance Company Swap Facility," which can revitalize the existing assets of securities and fund companies, encouraging them to actively participate in the market, invigorate it, and stabilize it, while also preventing non-bank institutions from "cashing out and leaving" due to liquidity issues. On the other hand, it has introduced the "Special Re-lending Facility" to support stock buybacks and increases, aiming to guide commercial banks to lend to listed companies or major shareholders for the purpose of stock buybacks and increases through incentive compatibility mechanisms. Compared to the central bank directly "entering the field" to buy and sell stocks, this approach follows market-oriented processes and does not generate moral hazard or price distortion issues.
"The swap facility does not directly give money and will not expand the scale of the base money. The Securities Fund Insurance Company Swap Facility adopts a 'swap for swap' method, which not only enhances the financing capacity of non-bank institutions but also does not directly provide funds to them, thus not injecting base money," said China Galaxy Macro.
Regarding the entry of medium and long-term funds into the market, Zhao Xijun stated frankly that there are already arrangements for medium and long-term funds at the institutional design level, such as securities investment funds, insurance company investment funds, and social security funds. However, in actual operations, they may turn into short-term investments, and the operation is not very ideal. The main reason is the lack of products in the market that can provide medium and long-term investors with long-term stable returns or return expectations, leading to unmet medium and long-term investment demands that transform into short-term demands.
"The capital market emphasizes the integration of investment and financing and should strengthen the investment function by addressing its weaknesses. In terms of policy, it can guide listed companies to provide medium and long-term stable returns to investors through stable dividends, market value management, and risk control," said Zhao Xijun. He also indicated that enterprise development needs to solve problems conceptually, and self-capability construction is crucial. The core competitiveness lies in technology and products. Technology is related to R&D and talent investment, and products are closely related to the market. Achieving R&D investment, innovation capability, and technology iteration updates can establish core competitiveness.
"Enterprises with core competitiveness and policy support can enhance their market value, leading to better overall stock market performance," said Zhao Xijun.
Key Point 3: Promoting the Steady Development of the Real Estate Market
The central bank also announced policies such as lowering reserve requirements and interest rates, reducing existing mortgage loan interest rates, and unifying the minimum down payment ratio for mortgages. Industry insiders believe that with the continuous strengthening of monetary policy support, it will play an active supporting role in stabilizing the real estate market and supporting the high-quality development of the real economy.Guangdong Kai Zhi Heng Macro has stated that the continued sluggishness of the real estate market is a significant drag on the current economic recovery. From January to August, the cumulative year-on-year decrease in commercial housing sales and real estate investment was 23.6% and 10.2%, respectively; in August, the year-on-year price decline for new and second-hand homes in 70 large and medium-sized cities was 5.7% and 8.6%, respectively. Furthermore, issues such as residents repaying loans ahead of schedule, tight liquidity for real estate companies, and reduced land transfer income for local governments are also detrimental to economic and financial stability. "A series of policies are expected to stimulate real estate demand, accelerate the stabilization and recovery of the real estate market, and alleviate the debt and liquidity pressure on real estate companies."
Zhao Xijun pointed out that due to the large scale of the real estate market, involving multiple departments and fields, and the long accumulation of problems, solving these issues requires a substantial investment of resources, and it is not something that can be completely resolved by one or two policies in the short term. "The current policy choice should aim to stabilize the market as much as possible, focusing on stabilizing representative cities and projects, grasping the main contradiction of core cities and projects, which can better address complex issues."
Huafu Securities Research Institute believes that the reduction in the interest rates of existing loans will not only alleviate the phenomenon of residents repaying housing loans ahead of schedule but also help to enhance residents' willingness and ability to consume. Specifically, the average reduction in the interest rates of existing housing loans is expected to be around 0.5 percentage points, reducing the total interest expenditure of families by approximately 150 billion yuan per year. After the policy is implemented, it is expected to further alleviate the phenomenon of residents repaying housing loans ahead of schedule and also help to boost consumer spending.