Fiscal Policy Boosts Confidence in Market Entities with Measures
On October 12th, the State Council Information Office held a press conference to introduce the efforts to increase the counter-cyclical adjustment of fiscal policy and promote high-quality economic development.
At the press conference, the head of the Ministry of Finance expressed the determination to increase the counter-cyclical adjustment of fiscal policy and achieve the annual budget targets. Specific arrangements were also made in areas such as debt resolution, people's livelihood, replenishment of bank capital, and the effective use of debt funds. There was also an expression of intention to increase the incremental fiscal policy.
This press conference attracted much attention, and the capital market was holding its breath. Publicly offered institutions and individuals interviewed expressed that the press conference fully demonstrated the central government's ability and willingness to increase fiscal policy, which is expected to enhance market confidence. After the market experienced a rapid rise and normal adjustment, market participants should have a more positive view of China's stock market than before.
Multiple measures to boost market entity confidence
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"The entire fiscal policy can be summarized as having clear goals, unity and cooperation among various departments, and focused policy objectives." Chief Economist of Chuangjin He Xin Fund, Wei Fengchun, believes that compared to the past, the Ministry of Finance's statement this time is a significant change and should be positively evaluated.
JPMorgan Asset Management believes that the press conference conveyed the government's positive attitude towards fiscal policy. In addition to the planned large-scale fiscal expenditure, it also emphasized that the central finance has a large debt space and a deficit increase space, reserving room for future fiscal policy to add strength.
JPMorgan Asset Management stated that in terms of specific policies, the support for debt resolution is relatively large. Combined with the annual regular special debt arrangement and the largest one-time replacement in recent years, it can be described as a "timely rain." In addition, the Ministry of Finance reduced the housing provident fund loan interest rate to reduce the cost of buying a house, the phased individual income tax refund for house replacement increased demand, optimized the supply of affordable housing, and provided 35 billion yuan of special loans for housing delivery. The policy of issuing special treasury bonds to support large state-owned commercial banks in replenishing core tier-one capital is also worth paying attention to. However, the press conference did not mention further specific plans to promote consumption, nor did it reveal the overall scale of fiscal policy and the leverage space of central finance. The specific expansion amplitude still needs to be observed.
In the view of Jing Shun Great Wall Fund, this press conference indicates that the central finance still has a large debt space and deficit space, which is exactly what the market has been looking forward to. Although the central finance can increase its efforts, it has not mentioned the specific scale, but it has fully demonstrated the ability and willingness of finance to the market, and market confidence is expected to be enhanced.
Bosera Fund's Macro Strategy Department expects that the market's focus may gradually shift to the Central Economic Work Conference and next year's "Two Sessions". From the statements at this press conference, the deficit ratio next year may rise to a certain extent, and the scale of special treasury bonds used for investment and construction will also increase.
"Considering the adjustment of the fiscal budget, the procedures for special treasury bonds, additional issuance of treasury bonds, etc., must be approved by the Standing Committee of the National People's Congress. Therefore, the Standing Committee of the National People's Congress meeting in October will be an important time window to observe the strength of fiscal policy." Ying Da Fund Manager Zhang Yuan said.China's Stock Market Expected to Usher in New Opportunities
Publicly traded institutions and individuals interviewed believe that this press conference will help boost market confidence, and A-shares are expected to usher in a structural slow bull market.
Wei Fengchun stated that although the market has experienced a decline after a rapid rise, this is a normal adjustment process. Market participants should have a more positive view of China's stock market than before, and China's stock market is expected to usher in new opportunities.
The investment research team of Jing Shun Great Wall also said that the current fiscal and monetary policies are working together, showing the determination of the policy layer to increase counter-cyclical regulation. In the future, it is important to focus on the implementation of specific fiscal plans by the Standing Committee of the National People's Congress, as well as subsequent incremental policies to support infrastructure and consumption. As policies are implemented and transmitted to the fundamentals, the market is expected to present structural investment opportunities, and industries with improved fundamental expectations can be actively followed.
Liu Sidan, an investment manager at the macro strategy department of Bosera Fund, believes that the current A-share market has a relatively consistent expectation for policy shifts. "From a medium-term perspective, I have strong confidence in the improvement of China's economy and the recovery of Chinese enterprises' profits. From a cyclical perspective, when the economy reaches a high point of repair or improvement in the future, the market's position is also more likely to be higher than the current one, and my judgment on the medium-term trend of the market is also relatively optimistic," he said.
Debang Fund estimates that the future market may return to fundamentals, mainly focusing on structural slow bull markets. The current adjustment is expected to provide momentum for the market to set sail again, and the investment main line should follow the path of reform, with high-quality development remaining the main focus.
Guotai Fund stated that the main beneficiaries are: first, banks, capital injection and debt resolution help banks solve the problem of refinancing; second, the consumer sector, including home appliances, automobiles, etc.; third, the technology growth sector with resilient prosperity, including communications, lithium batteries, energy storage, etc.
Regarding the specific sectors to focus on, Liu Sidan said that the first is themes with high growth and large elasticity, with significant increases in the direction of science and innovation, although the risks are also higher; the second is valuation repair themes, which, while benefiting from the release of domestic liquidity, also resonate with the inflow of overseas funds and the efforts of domestic policies, such as consumption, new energy, pharmaceuticals, education, cycles, etc. He suggested paying attention to sectors closely related to this policy adjustment, such as the real estate chain.Zhang Yuan stated that the main focus is on several directions: first, the new quality of productive forces sector, such as the domestic substitution of TMT, and the transformation and upgrading of the manufacturing industry towards high-end, intelligent, and green development; second, the long-term development direction related to expanding domestic demand and improving people's livelihood, such as consumption, entertainment, and home appliance sectors; third, the underestimated sectors in the cyclical trend and the sectors related to the market-oriented reform of factors, such as energy, railway, and public utilities.
Regarding the investment main line in the fourth quarter, Wei Fengchun believes that equity investment may become the top priority. If the equity investment main line is divided into two categories, one is the stable dividend low-volatility stocks (such as bank stocks), and the other is growth stocks (such as technology stocks), the fourth quarter should focus on fields with long-term growth potential, especially growth-oriented enterprises with innovation capabilities, technological breakthroughs, and reasonable valuations in the field of growth stocks.
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