Guotai Junan: Residents increase their allocation of equity products, improving market liquidity and benefiting brokerage sectors.

Guotai Junan Securities released a research report stating that in September 2024, there was a significant increase in the issuance of new equity products, leading to increased allocation of equity products by residents. Since September 24th, the equity market has rebounded significantly, with the market index rebounding more strongly than small and mid-cap stocks, leading to a slight increase in residents' risk preferences. The accelerated implementation of a series of incremental policies has improved market liquidity, benefiting the brokerage sector, with top brokerages expected to be the focus of funds due to merger and restructuring expectations. In September 2024, there was a significant increase in the issuance of new equity products, leading to increased allocation of equity products by residents. 1) As of September 2024, the total market public offering fund increased by -3151.58 billion shares, a month-on-month increase of -1.06%. The total number of equity funds increased by 352.05 billion shares, a month-on-month increase of 0.56%, while the total number of bond funds increased by 269 billion shares, a month-on-month increase of 0.46%. The amount of money market fund shares increased by -3589.18 billion shares, a month-on-month decrease of -2.68%. The new equity funds increased by 276.53 billion shares, a month-on-month increase of 164.06%, while the new bond funds increased by 566.96 billion shares, a month-on-month increase of 44.3%. 2) In September 2024, the scale of private equity fund allocations by residents remained stable, with a month-on-month decrease of -0.05%, while the scale of new private equity funds decreased slightly month-on-month. 3) In September 2024, the scale of equity private equity management increased month-on-month by 5.77%, while fixed-income private equity management decreased month-on-month by -2.99%. The new scale of equity private equity management increased month-on-month by 16.46%, while the new scale of fixed-income private equity management decreased month-on-month by -33.91%. 4) In September 2024, the total premium income of listed insurance companies in China was 248.944 billion yuan, a year-on-year increase of 9.11%, and a month-on-month decrease of 20.61% compared to the previous month. The downward opening of interest rates has created room for residents' expected yield to decline; improved market liquidity has led to a slight increase in residents' risk preferences. 1) On September 19th, the Federal Reserve announced the latest interest rate decision, cutting the benchmark interest rate by 50 basis points, marking the start of a rate cut cycle. On September 24th, a combination of financial policies was introduced, with the People's Bank of China deciding to lower the deposit reserve ratio of financial institutions by 0.5 percentage points from September 27, 2024, and the 7-day reverse repo operation of the open market decreased by 20 basis points. The yield on the 10-year government bond fell to 2.15% in September. The downward opening of interest rates has led to a decline in residents' expected yield. 2) Since September 24, 2024, there has been a significant rebound in the equity market, with the market index rebounding more strongly than small and mid-cap stocks. With improved market liquidity, residents' risk preferences have slightly increased. The concentrated issuance of innovative equity ETF products provides tools to support residents' increased allocation to equity. 1) In September 2024, influenced by market conditions, equity product yields stood out. The stock fund index fluctuated by 20.39%, the mixed fund index fluctuated by 15.63%, and the bond fund index fluctuated by 0.33%. In a market index situation, the yield advantage of ETF products is more prominent. 2) Policy support further drives the growth of equity fund size, with the first batch of CSI A500 ETFs being issued in September, providing convenient tools for residents to grasp the equity market situation. Continued improvement of market liquidity benefits the brokerage sector, and it is recommended to increase holdings of leading brokerages with merger expectations. 1) On the product side, the advantage of insurance product liquidity has gradually diminished, weakening the ability of single products to meet demand. On the channel side, the continuous issuance of innovative ETF products provides high-quality tools for residents to participate in the equity market. 2) Since September 24, 2024, a series of incremental policies have been implemented, improving market liquidity and benefiting the brokerage sector, with leading brokerages expected to be the focus of funds due to merger and restructuring expectations.