Understanding the Market | Simultaneous Implementation of RRR Cut and Interest Rate Cut by the Central Bank, Domestic Bank Stocks Fall Against the Trend, Agricultural Bank of China Drops More Than 4%

According to the Wise Finance APP, Chinese bank stocks fell against the trend in the morning session. As of the time of publication, Agricultural Bank of China (01288) fell by 4.25% to HKD 3.83; Industrial and Commercial Bank of China (01398) fell by 3.11% to HKD 4.68; China Construction Bank (00939) fell by 2.58% to HKD 6.04; Postal Savings Bank of China (01658) fell by 2.32% to HKD 4.63.

On the news front, the central bank implemented a reserve requirement ratio cut and interest rate cut today, releasing 1 trillion yuan of liquidity. The People's Bank of China (PBOC) announced on its official website that it would reduce the 7-day reverse repurchase operation rate by 0.2 percentage points from the previous 1.70% to 1.50%. At the same time, the official news showed that the PBOC decided to reduce the reserve requirement ratio for financial institutions by 0.5 percentage points (excluding financial institutions that have already implemented a 5% reserve requirement ratio) starting from September 27, 2024.

Caitong Securities pointed out that considering the impact on both assets and liabilities, this policy will drag down banks' net interest margin in 2025, but the overall impact is controllable. The bank believes that the reduction in existing home loan rates is basically in line with expectations and has already been partially reflected in the previous sector's correction. The more-than-expected reserve requirement ratio cut and interest rate cut policies will support the banking sector fundamentals. Meanwhile, with the increase in incremental funds and long-term funds entering the market, the banking sector, based on high dividend yields and sound fundamentals, is expected to continue to benefit