"Double reduction" drives the explosive growth of the large financial sector, with Ping An Insurance (02318) rising by over 7%.

Following the rate cut policy by the Federal Reserve, China quickly followed suit, announcing a "double cut" in interest rates. The large financial sector as a whole saw a rise, with Ping An Insurance H shares (02318) rising by over 7% in a single day, with a total increase of over 35% in the past three weeks. On September 24th, the central bank announced a reduction in the reserve requirement ratio and policy interest rates, including a 0.5 percentage point reduction in the reserve requirement ratio, providing around 1 trillion yuan of long-term liquidity to the financial market, and lowering the 7-day reverse repurchase operation rate by 0.2 percentage points to 1.5%, guiding the loan market quoted interest rate (LPR) and deposit rate to decrease simultaneously. This news caused a frenzy in the capital markets, with the Hang Seng Index rising by over 3.5%, and financial sectors such as banks and insurance experiencing a 4% increase, with individual stocks seeing a large increase across the board. How powerful is this "double cut"? It is well known that reserves are the basis for money creation. By lowering the reserve requirement ratio, commercial banks have more deposits to lend, creating a multiplier effect through circulation. Additionally, there is room for further reduction in the reserve requirement ratio by 0.25 to 0.5 percentage points, allowing for more easing policies. Policy interest rates guide commercial bank lending behavior, and with lower standards, operations become more flexible, greatly increasing loan activity and economic vitality in the market. Investors are highly sensitive to interest rates, and under reverse changes, whether in the real or capital markets, a reduction in interest rates will lead to an investment boom. Capital markets lead the way, with most funds flowing into the stock market, driving the bull market, and benefiting the large financial sector from these policies receiving favorable attention. In fact, the global interest rate reduction cycle was launched since September 19th when the Federal Reserve announced a 50 basis point reduction in the federal funds target range. With global inflation pressure easing, the focus of monetary policy has shifted from inflation suppression to economic growth, stimulating domestic economic growth and balancing current accounts through currency manipulations to counter the capital flows under loose policies of other countries. Under the "interest rate reduction cycle," the large financial sector will be the main investment focus. Ping An Insurance stands out in the Hong Kong stock market, with a comprehensive range of financial services encompassing banking, insurance, and securities. There is a clear rush of funds towards it; according to Futu NiuNiu software, the net inflow of main funds exceeded 700 million Hong Kong dollars that day. Additionally, data shows that the company's holdings through the Hong Kong Stock Connect have increased by 192 million shares since the beginning of the year, with the shareholding value rising by 7.8 billion Hong Kong dollars. Ping An Insurance has a strong foundation and continues to achieve stable growth in core businesses through its "comprehensive finance + medical care and retirement" strategy. In the first half of this year, the company achieved revenue of 554.097 billion yuan, with the operating profit attributable to the parent company's shareholders from life insurance and health insurance, property insurance, and banking reaching 79.565 billion yuan. Its growth and profitability remain robust. Q3 results show a clear acceleration trend. In the period from January to August, the company achieved original insurance contract premium income of 620.706 billion yuan, a year-on-year increase of 7.64%, an increase of 2.94 percentage points from the first half of the year. The premium growth rates of property insurance and life insurance increased by 1.2 and 4 percentage points respectively. Especially in August, despite a high base in the previous year, both life insurance and property insurance achieved double-digit growth, with life insurance premium income growing by 38%. Coupled with a strong banking business and the impact of the interest rate cuts in Q4, it is expected that the company's full-year revenue and profit growth will be very optimistic. This interest rate cut directly impacts Ping An Insurance's banking business, significantly increasing the loan amount available to banks through the "double cut" by the central bank. Commercial banks are also guided to reduce the interest rates on existing housing loans to levels near those of new housing loans by an average of 0.5 percentage points, while lowering the down payment ratio for second homes from 25% to 15%. This stimulates housing demand significantly, driving the real estate industry to bottom and rise, as well as the effective use of bank funds. Furthermore, the interest rate cut indirectly affects other businesses such as insurance and securities through the transmission of interest rates to investments. Ping An Insurance's "comprehensive finance" offers a package of financial products to meet users' needs in asset preservation, appreciation, and investment security. As of June 2024, Ping An has 236 million individual customers, with 24.9% of them holding four or more contracts within the group and a retention rate of 97.8%. It is worth noting that the recent press conference held by the State Council Information Office also highlighted the official emphasis on market value management of listed companies. Yi Gang, the Governor of the People's Bank of China, stated that they will facilitate the exchange of securities, funds, and insurance companies to support eligible securities, funds, and insurance companies in obtaining liquidity from the central bank through asset pledges, significantly enhancing their funding capacity and stock holding capabilities. Wu Qing, Chairman of the China Securities Regulatory Commission, also pointed out the improvement in the system environment for long-term investment, increasing the inclusiveness of supervision for medium and long-term equity investments, fully implementing a three-year assessment period, overcoming institutional obstacles affecting long-term investment of insurance funds, and encouraging corporate pension funds to explore various types of investments based on holders' age and risk preferences. Ping An Insurance has always been a benchmark in market value management, maintaining stable stock prices and investor returns through strong performance, high-level dividends, and stock buyback policies. In this expected global interest rate cut trend, with a PB ratio of only 0.7 times and a PE (TTM) of only 7 times, the comprehensive financial leader Ping An Insurance is expected to benefit from the "double cut" policy, achieving performance and valuation "double strikes," with the return to value just around the corner.