On Tuesday (24th), the A-shares and Hong Kong stock markets surged. The Shanghai Composite Index rose for the fifth consecutive day, while the Hang Seng Index and the Hang Seng China Enterprises Index both achieved a ten-day consecutive increase, with gains exceeding 2%.
The driving force behind this wave of increases comes from the latest policy adjustments announced by the People’s Bank of China. Governor Pan Gongsheng announced at a press conference that the reserve requirement ratio will be reduced by 0.5 percentage points, which is expected to release long-term liquidity of 1 trillion yuan. By the end of the year, there may be another cut of 0.25-0.5 percentage points. Additionally, the central bank lowered the seven-day reverse repo rate by 0.2 percentage points to guide a concurrent reduction in the loan prime rate (LPR). Moreover, the central bank adjusted the mortgage policy, reducing the minimum down payment ratio for second homes from 25% to 15%, further easing policy pressure on the real estate market.
This policy adjustment is not limited to the banking system but also includes providing liquidity support to securities, fund, and insurance companies, facilitating funding through asset pledges to enhance their ability to increase holdings.
Analysts generally believe that with the start of the interest rate cut cycle, foreign capital and southbound funds have seen continuous net inflows into the Hong Kong market, raising the valuation center of Hong Kong stocks. A report from Guotai Junan indicates that Hong Kong stocks are still in a favorable window period. As the global monetary easing policy continues to advance, Hong Kong stocks are likely to remain strong, while A-shares may gradually narrow the gap with Hong Kong stocks in the future.
