Jinwu Financial News | Guoyuan International reports that in the early morning of September 19, Beijing time, the Federal Reserve held an interest rate meeting, and the federal funds rate was lowered by 50 bp to 5.75%-5.0%. On September 24, the Information Office of the State Council held a press conference on financial support for high-quality economic development. Central Bank Governor Pan Gongsheng said at the meeting that the deposit reserve ratio will be lowered by 0.5 percentage points in the near future to provide long-term liquidity to the financial market by about 1 trillion yuan. Within this year, depending on market liquidity conditions, an opportunity may be taken to further reduce the reserve ratio by 0.25 to 0.5 percentage points; the central bank's policy interest rate will be lowered, and the 7-day reverse repurchase operation interest rate will be reduced by 0.2 percentage points, from the current 1.7% to 1.5%.
The bank pointed out that with the decline in coal prices and the full development of market-based electricity transactions, the early market generally had pessimistic expectations about future electricity price trends, and electricity sector valuations were under pressure for a long time. As a result, electricity demand showed resilient growth that exceeded expectations, which is beneficial to improving the market's excessively pessimistic expectations about electricity prices.
The bank said that in the context of interest rate cuts at home and abroad, power operators, as an interest-sensitive sector with heavy asset investment, are expected to benefit from declining interest rates leading to an increase in the return on project investment and a decrease in the company's overall financial costs, helping power operators' performance grow steadily. Moreover, the dividend payout rate in the power industry has continued to rise in recent years. Electricity assets have the nature of sustainable utilities. Special electricity prices are relatively stable for hydropower and nuclear power, which have the attributes of long-term bonds, and the medium- to long-term investment value is expected to be further revalued. Key recommendations: CGN Power (01816), China Electric Power (02380), and China Resources Power (00836).