Understanding the Market | Chinese brokerage stocks lead the gains as the central bank announces a reserve requirement ratio cut and interest rate reduction, expanding the pilot scope for long-term insurance fund investments
Chinese brokerage stocks saw significant gains, with CMS rising 4.41% and CITIC Securities Co., Ltd. rising 4.31%. The People's Bank of China announced a 0.5 percentage point reserve requirement ratio cut and a 0.1 percentage point interest rate cut, as well as optimizing monetary policy tools for the capital market, consolidating the quota to 800 billion yuan. The regulatory director stated that the pilot program for long-term investment of insurance funds will be expanded. Analysts believe that the brokerage sector is undervalued, with performance exceeding expectations, and is likely to achieve valuation recovery in the future
According to the Zhitong Finance APP, Chinese brokerage stocks are among the top gainers. As of the time of writing, China Merchants Securities (06099) is up 4.41%, trading at HKD 12.78; CITIC Securities (06030) is up 4.31%, trading at HKD 20.55; Shenwan Hongyuan (06806) is up 3.74%, trading at HKD 2.22; China International Capital Corporation (03908) is up 3.05%, trading at HKD 14.18; and China Galaxy (06881) is up 2.89%, trading at HKD 7.48.
In terms of news, Pan Gongsheng, Governor of the People's Bank of China, announced at a press conference on May 7 that the reserve requirement ratio will be lowered by 0.5 percentage points, and the policy interest rate will be reduced by 0.1 percentage points. Additionally, the central bank announced the optimization of two monetary policy tools to support the capital market, merging the quotas of 500 billion yuan for securities fund insurance company swap facilities and 300 billion yuan for stock repurchase relending, resulting in a total quota of 800 billion yuan. Li Yunzhe, Director of the National Financial Regulatory Administration, stated that the pilot scope for long-term investment of insurance funds will be further expanded to bring more incremental funds into the market.
Kuyuan Securities stated that the valuation of the brokerage sector and institutional holdings are at low levels, and macroeconomic measures to stabilize the economy and stock market continue. Coupled with traditional brokerages' first-quarter performance exceeding expectations, they remain optimistic about opportunities in the brokerage sector. CITIC Securities believes that focusing on 2025, the securities industry is expected to rely on high trading volumes, a continuous recovery in the capital market, and further cost control to demonstrate its performance elasticity. Currently, the valuation of the securities industry is at the 42nd percentile since 2018, and it is expected to achieve valuation recovery as capital market reforms continue to advance
