On Friday (September 20), China's three major stock indices collectively pulled back, with market sentiment subdued. Over 3,700 A-shares declined, and net capital outflows exceeded 6.5 billion yuan. The market had hoped the central bank would release more easing signals in the September Loan Prime Rate (LPR) adjustments, but the latest LPR quotation showed that both the 1-year and 5-year LPRs remained unchanged, failing to meet expectations for a rate cut, which put pressure on the market.
According to data released by the National Interbank Funding Center authorized by the People's Bank of China, the Loan Prime Rates (LPR) for September 20, 2024, are: 3.35% for 1-year LPR and 3.85% for 5-year LPR. The standstill in LPR quotations dashed hopes for an accommodative monetary policy, resulting in the stock market's overall poor performance.
In this context, analysts from GF Securities pointed out that if there had been a 25 basis point rate cut in September, A-shares could have seen a one-month rebound "safe period"; and if the cut had been 50 basis points, the market might have entered a strong rebound phase for at least one quarter, switching to an "offensive" strategy. However, since the rate cut did not materialize, analysts advise investors to adopt a defensive strategy and manage risks, especially given the short-term market uncertainties.
As China's economic growth slows and global economic uncertainties intensify, A-share investors are taking a wait-and-see approach. Many sectors are under pressure, particularly facing the dual blows of capital outflows and declining investor confidence, which could prolong the market adjustment. Therefore, analysts recommend that investors prioritize defensive assets and operate prudently to avoid excessive risk in the coming period.
Regarding future policy directions, the market will continue to closely monitor the People's Bank of China's monetary policy adjustments, hoping that easing policies will be introduced at an appropriate time to boost market confidence and economic growth.
