CMS: Expectations for Fed rate cuts to rise, high-quality leading A-share stocks in September are expected to have a relatively dominant position

According to the financial news app Zhitong Finance, CMB Securities released a research report stating that in September, high-quality leading styles are expected to have a relative advantage. Firstly, with the decline in US inflation and cooling labor market, as well as Powell's clear dovish turn, the shift in the Fed's monetary policy has been determined. After the Fed's rate cut, the external liquidity environment faced by A-shares is expected to improve, and the value leading styles that have been increased by northbound funds since the beginning of this year are expected to have an advantage. Secondly, the continuous expansion of ETFs has become an important variable in the A-share market. Industries such as non-banking financial institutions, banks, and utilities that have been over-allocated by ETFs since the beginning of this year have achieved good excess returns. With the continuous net inflow of passive funds, the leading styles represented by the large-cap market are expected to have an advantage. Thirdly, premium growth and the new guidelines for OCI accounts are driving continuous net inflows of insurance funds, with a preference for dividend styles.

August Review: Major global trades in August saw the Fed cut interest rates, and the US dollar index rapidly decline. In terms of major asset classes, global stock markets varied, with the US and Europe > Hong Kong stocks > A-shares. In the foreign exchange market, the US dollar index fell, non-US currencies strengthened, and the RMB exchange rate appreciated slightly. In terms of commodities, industrial metals, which had fallen rapidly earlier due to recession concerns, saw a significant increase in this month. In the bond market, US bond yields rapidly declined as the certainty of rate cuts increased, while Chinese bond yields first fell and then rose, narrowing the spread between Chinese and US yields. A-shares experienced a volatile adjustment in August, with a preference for large-cap styles.

Liquidity and Fund Supply and Demand: In terms of liquidity, although the issuance of government bonds accelerated in August, R007 and DR007 rates continued to fluctuate near the 7-day reverse repurchase rate, indicating relatively abundant liquidity in the money market with no significant liquidity demand pressure. Looking ahead, as the Fed enters a rate-cutting cycle, the depreciation pressure on the RMB exchange rate is easing, and the necessity of boosting domestic demand policies is becoming more apparent, potentially opening up further room for monetary policy stimulus. Overseas, the US significantly revised down non-farm payroll numbers, Powell clearly signaled rate cuts, and the market has priced in three rate cuts this year. In terms of fund supply and demand in the stock market, the scale of trackable funds in August decreased, while fund demand remained at a low level with a slight net inflow. ETFs on the supply side significantly contributed to the net inflow of incremental funds, while margin financing and northbound funds continued to see a net outflow. Fund demand continued to remain relatively low, and looking ahead, liquidity may continue to moderately improve.

Market Sentiment and Fund Preferences: 1) The equity risk premium continued to rise in August, reaching more than the mean + 2 standard deviations. 2) The turnover rate and trading volume of major broad-based indices mostly decreased in August. Currently, the valuations and trading concentration of small-cap growth, CSI 1000, and CSI 500 have reached historically low levels. 3) In terms of primary industries, the industries that saw a significant increase in trading activity in August were mainly concentrated in media, pharmaceuticals, household appliances, social services, and environmental protection