GF SECURITIES·2026-03-15 12:32Core Insights - The report emphasizes the financial impact of rising inflation, particularly due to the recent increase in oil prices, which is expected to have a more significant effect on the price system compared to previous instances, such as during the 2022 Russia-Ukraine conflict [21][22] - The current economic cycle is positioned differently than in 2022, with signs indicating a potential recovery in corporate inventory and an increase in long-term loans, suggesting a shift towards a demand cycle [21][22] - The report predicts that long-term bond rates will likely break through their upper resistance levels as nominal economic recovery continues, with structural monetary policy adjustments being a key focus for the central bank [3][23] Financial Implications - The report outlines three main financial implications: 1. Long-term bond rates are expected to rise, with the ten-year government bond yield likely to break its current range [3][23] 2. A decrease in market risk appetite may lead to a shift from liquidity-driven asset valuation to profit-driven valuation, potentially resulting in a challenging period for financial assets [3][23] 3. The ongoing geopolitical tensions in the Middle East may drive capital flows towards safer assets, including RMB-denominated assets, depending on the pace of financial infrastructure opening [3][23] Banking Sector Adjustments - The banking sector is advised to adjust its mindset regarding the interest rate down cycle, preparing for a scenario where interest rates and funding costs may no longer decline [4][24] - Large banks should focus on reducing the duration of loans and increasing the acquisition of settlement deposits, while smaller banks need to extend the duration of liabilities to mitigate potential impacts from cyclical shifts [4][24] Market Performance - During the observation period from March 9 to March 13, 2026, the banking sector overall increased by 1.5%, outperforming the broader market [19][56] - The report notes that the A-share banking sector showed a positive performance, while H-share banks lagged behind, indicating a divergence in market performance [19][56] Profit Forecasts - The report indicates that profit growth expectations for banks in 2025 remain largely unchanged, with minor adjustments noted for specific banks [20][56]