RRR cut: stick with sectors with a favourable outlook
■ Historical data shows that RRR cuts do not necessarily boost the A-share market. Investors should not be overly optimistic about the near-term market trend.
■ Sectors with a favourable outlook usually perform better after an RRR cut. Currently, we prefer new energy vehicles (NEVs), semiconductors and non-ferrous metals.
■ Tactically, investors may also look at the power equipment and national defence sectors, which usually perform well after an RRR cut.
■ It’s too early to tell whether this is the beginning of monetary easing, but we expect to see another RRR cut in 4Q21 because a large amount of MLF will mature.
■ The views of this note are largely based on material from China Galaxy Securities Research.