In the early morning session today, A-shares maintained a volatile trend. The Shanghai Composite Index gradually climbed after testing support at 3,200 points, and the Shenzhen Component Index also strengthened after finding support near 10,000 points. The STAR 50 Index turned slightly positive from a drop of over 2% during the session. By the midday close, nearly 4,400 stocks across the two markets were up, with trading volume approaching one trillion yuan.
On the market, the AMC concept, national defense and military industry, banking, and real estate sectors led the gains, while public transportation, securities, daily chemical products, and newly listed stocks led the declines.
AMC Concept Welcomes Policy Benefits
The AMC concept opened sharply higher in the morning, with the sector index once surging nearly 5% in volume, and half-day transactions approaching the full-day transactions of the previous trading day. Stocks such as Everbright Jibao, Cinda Real Estate, and Haida Shares all hit the daily limit, while Yili Da, Shaanxi International Trust A, and Huaren Group also strongly hit the daily limit or rose by more than 10%.
From the news front, last weekend, Finance Minister Lan Fo'an stated at a press conference held by the State Council Information Office that the Ministry of Finance will issue special treasury bonds to support large state-owned commercial banks in replenishing their core tier-one capital, enhancing these banks' risk resistance and credit extension capabilities, and better serving the development of the real economy. This means that after 26 years, large state-owned banks will again receive capital injections from the Ministry of Finance's special treasury bonds.
Lan Fo'an also pointed out that a package of targeted incremental policy measures will be introduced in the near future; the Ministry of Finance plans to increase the debt limit by a large scale at one time, exchange local government's existing hidden debt, and increase support for local governments to resolve debt risks; other policy tools for counter-cyclical regulation are still under study, such as the central finance still having a large debt space and a deficit increase space.
Debt-to-equity swap, as a system for resolving non-performing claims, has now become an important way for financial asset management companies (AMCs) to dispose of non-performing assets. At the same time, in recent years, with the improvement of AMC's asset disposal methods and the continuous development of China's capital market, the debt-to-equity assets held by AMCs have also brought substantial returns to AMCs.
According to statistics from the National Financial Regulatory Administration, by the end of 2023, the overall non-performing loan balance of banking financial institutions was 3.95 trillion yuan (the scope of banking financial institutions includes commercial banks, rural credit cooperatives, and other financial institutions that accept public deposits, as well as policy banks), with a non-performing loan rate of 1.62%, and 3 trillion yuan of non-performing assets were disposed of throughout the year.
CITIC Construction Investment stated that the positive impact of debt reduction on the economy is greater than the incremental stimulus. This marks the start of central leverage, which is also the long-awaited "central government's entry" by the market. The joint easing of central finance and currency is a liquidity "feast" for the market.
Severe International Situation, Military Industry Stocks StrengthenMilitary industry stocks rallied collectively in the morning, with the sector index opening high and rising, at one point surging nearly 3% with a significant volume increase. Stocks such as AVIC Electronic Measurement Technology, North Dragon, and Silver邦 Shares saw a 20% daily limit rise, while Red Phase Shares, Morning Star Aviation, Great Wall Military Industry, and Lianshi Aviation were among more than 10 stocks that hit their daily limit rise or increased by more than 10%.
Related sectors such as large aircraft, civil-military integration, commercial space, military informatization, and satellite navigation also showed strong upward momentum, with stocks like Da Hua Intelligent, Furi Electronics, New Continent A, and Baota Industry hitting the daily limit rise in large numbers.
Recently, the international situation has become increasingly severe, with the confrontation on the Korean Peninsula showing a trend of escalation, and the Israel-Palestine conflict is intensifying day by day.
The previous day, the Ministry of National Defense of North Korea stated that the General Staff of the Korean People's Army had issued combat readiness instructions on October 12, requiring the front-line Korean People's Army artillery combined units and units undertaking important firepower missions to be fully prepared for comprehensive firing. If it is confirmed that the South Korean side provokes again, it must be immediately struck.
The Ministry of Foreign Affairs of North Korea declared that following the intrusions on the 3rd and 9th of this month, South Korean drones also flew into the airspace above Pyongyang on the evening of the 10th, air-dropping anti-North Korean propaganda leaflets. The infiltration of South Korean drones violated North Korea's national sovereignty and security, contravening international law. The Ministry of National Defense, the General Staff, and various levels of the military have begun preparations to respond to various developments.
At the same time, on the 13th, the Ministry of National Defense of South Korea sent a text message titled "Regarding the Stance Related to the Remarks of Kim Yo Jong of North Korea" to the media, stating that the South Korean side issued a stern warning to North Korea. If North Korea infringes upon the safety of South Korean citizens, that day will be the day of the destruction of the North Korean regime.
In terms of Israel and Palestine, since the outbreak of a new round of conflict between the two sides in October last year, there is still no sign of a ceasefire, and multiple spillover effects have emerged. From the Israel-Palestine conflict to the Lebanon-Israel conflict, and then to Iran's missile attacks on Israel, the situation in the Middle East continues to be tense.
Galaxy Securities pointed out that as the third-quarter performance is realized, there is a long period before the annual report, and industry orders for the fourth quarter are approaching, coupled with the high expectations for 2025, the performance of the defense and military industry sector is expected to be significantly stronger than the overall market, with beta opportunities becoming prominent. Some companies have a low base for their third-quarter performance in 2023, and there may be a turning point in year-on-year growth in the third quarter of 2024, achieving a turnaround in difficulties, and alpha opportunities are emerging.
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