The Zhitong Finance App learned that Zhongtai Securities released a research report saying that it is currently at a stage of rising market preferences and differences in future economic expectations. Financial policy is strong, firmly adheres to supportive monetary policy positions, and pays more attention to price indicators. Currently, there is a big deviation between deposit and loan interest rates and policy interest rate adjustments. The central bank has taken a number of measures to unblock interest rate transmission mechanisms, maintain competitive order and implementation of interest rate policies, and stabilize bank net interest spreads.

The main views of Zhongtai Securities are as follows:

Overall idea: Adhere to a supportive monetary policy stance and pay more attention to price indicators.

(1) Strong monetary policy and firm adherence to supportive monetary policy positions. The report emphasizes adhering to a supportive monetary policy and increasing the intensity of monetary policy regulation. The monetary policy tone continues to be “flexible, moderate, precise and effective”. The bank believes that financial policy will continue to maintain an overall positive attitude. At the same time, fiscal policy may have a greater impact than monetary policy.

(2) Downplay quantitative targets and focus on price targets: promote a reasonable recovery in prices; unblock interest rate transmission mechanisms, and stabilize interest spreads. Appropriately narrow the width of the interest rate corridor: The central bank added the expression “improving the accuracy of monetary policy” to the report, and stated that in the next stage, it will gradually reduce its focus on quantitative targets, align with international experience, and gradually strengthen the price control model.

Unblock interest rate transmission mechanisms and stabilize interest spreads: There is a big deviation between deposit and loan interest rates and policy interest rate adjustments. The main reason is intense market competition and serious bank “internal involvement”. The central bank has taken a number of measures to unblock interest rate transmission mechanisms, maintain competitive order and implementation of interest rate policies, and stabilize banks' net interest spreads. At the same time, promoting a reasonable recovery in prices is an important consideration in grasping monetary policy.

Credit policy:

(1) Credit structure optimization. Focus on the five major articles. Technology finance ranked first in the five major articles. This year, technology finance service capacity building achieved positive results: the policy framework continued to improve and optimize the regional technology finance layout; financial policy tools were more perfect and accurate. At the end of September, the balance of medium- and long-term loans in the manufacturing industry increased 14.8% year-on-year, 6.7 percentage points higher than the overall loan growth rate. In terms of inclusive finance, local legal financial institutions are actively using agricultural support, small reloans, and rediscounts to guide local legal financial institutions to expand credit investment in agricultural, small, micro, and private enterprises. At the end of September, the balance of inclusive small and micro loans increased by 14.5% year-on-year, 6.4 percentage points higher than the overall loan growth rate.

(2) Real estate: Promoting the real estate market to stop falling and stabilize. The statement on real estate was clearly strengthened. The report revised almost all statements, stating that it is necessary to “focus on promoting the implementation and effectiveness of incremental real estate finance policies, guide financial institutions to strengthen financial security, meet the rigid and diverse needs of urban and rural residents for improved housing, actively support the acquisition of existing commercial housing for use as affordable housing, and support the revitalization of existing vacant land.”

Interest rate policy: Unblock the interest rate transmission mechanism and pay attention to bank net interest spreads.

(1) Downplay quantitative targets and improve the statistical caliber of money supply. Research on personal current accounts and provisions from non-bank payment institutions is included in M1 statistics, and M2 statistics are adjusted in due course in line with developments and changes in financial instrument liquidity.

(2) Unblock the interest rate transmission mechanism, and the “internal volume” phenomenon of bank deposit and loan interest rates has attracted the attention of the central bank. The central bank clearly proposed that in the next step, financial institutions should improve their autonomous “rational” pricing capabilities to respond more rationally to market demands and risks. Furthermore, the central bank pointed out that further regulation of interest rate cuts is constrained by both net interest spreads and exchange rates, particularly internal and external pressure.

(3) The weighted average interest rate for general loans has stabilized, and interest rates on corporate loans have declined significantly.

Investment advice: Focus on recommending high-quality urban and agricultural commercial banks with income from chemical bonds, and choose urban agricultural commercial banks with high fundamentals and cheap valuations.

The bank continues to recommend Bank of Jiangsu (600919.SH), Yunong Commercial Bank (601077.SH), Shanghai-Agricultural Commercial Bank (601825.SH), Qilu Bank (), and Changshu Bank (USD); 601665.SH 601128.SH

If economic expectations continue to rise, core assets in banks are recommended: Bank of Ningbo (002142.SZ), China Merchants Bank (600036.SH), and Industrial Bank (601166.SH);

The economy is recovering weakly, benefiting from debt conversion, and varieties with high dividend rates. Large banks are recommended: Agricultural Bank (601288.SH), Bank of China (601988.SH), Postbank (601658.SH), Industrial and Commercial Bank (), China Construction Bank (DAB), Bank of Communications (), etc. 601398.SH 601939.SH 601328.SH

Risk warning: Policy progress fell short of expectations, and the economic downturn exceeded expectations.