1. Report's Industry Investment Rating No industry investment rating was provided in the report. 2. Core Views of the Report - The necessity of a reserve requirement ratio cut is increasing due to liquidity pressure on banks' liability side in Q4, but the possibility of an interest rate cut requires further observation of economic data and tariff game impacts [3][4] - If a reserve requirement ratio cut occurs, it may drive down short - term and certificate of deposit rates; if an interest rate cut occurs, the magnitude is crucial, and the bond market may experience a small decline in interest rates, but the downward space is limited [48][49] 3. Summary by Relevant Catalogs 3.1 History of Q4 Reserve Requirement Ratio and Interest Rate Cuts - In the past 5 years, except for 2021, policy rates were generally cut twice a year but not in Q4. In 2020, cuts were in H1; in 2024, in H2; in 2022, once each in H1 and H2, mostly by 10BP, with 20BP cuts in March 2020 and September 2024 [1][10] - In 2021, there was no interest rate cut, but the 1 - year LPR was cut by 5BP in Q4. In 2024, the policy rate was cut by 20BP in September and the LPR by 25BP in October [10] - From 2020 - 2022, reserve requirement ratio cuts were about twice a year, once each in H1 and H2, and there were cuts in Q4 of 2021 - 2022. In 2020, affected by the pandemic, comprehensive and targeted cuts were used in H1 [11] 3.2 Central Bank's Stance on Monetary Policy - After the reserve requirement ratio and interest rate cuts in early May this year, the policy focus shifted to the implementation of existing policies, with room for flexible adjustment based on the situation [2] - The "opportunistic" in "opportunistic reserve requirement ratio and interest rate cuts" has three meanings: adverse changes in the economic fundamentals, weakened effects of expansionary fiscal policies, and a sharp decline in the capital market [2][17] - Currently, the necessity for monetary policy to support expansionary fiscal policies may be decreasing, and the focus of monetary policy may be on supporting economic growth, which depends on macro - economic conditions [2][18][19] 3.3 Possibility of Reserve Requirement Ratio and Interest Rate Cuts This Year 3.3.1 Necessity of a Reserve Requirement Ratio Cut - Banks' liability side faces liquidity pressure in Q4, increasing the necessity of a cut. The high maturity scale of medium - and long - term liquidity, the need to supplement liquidity regularly under the "structural liquidity shortage" framework, and the special situation this year (large - scale high - interest time deposit maturities and a narrowing M2 - M1 gap) all contribute [20][21][24] 3.3.2 Possibility and Boundaries of an Interest Rate Cut - Since 2024, the central bank launched "policy combos" under different domestic and international macro - environments. Currently, there are similarities and differences, leading to a divergence in market expectations for loose monetary policy [28] - Although Q4 economic data is expected to slow down compared to Q3, it doesn't directly mean a window for policy intensification. It is necessary to observe economic performance from November to December and the impact of the tariff game [39][40] - To support the real economy, a cut in structural monetary policy tools may come first. And a cut may not be the only way to promote a reasonable rise in prices and reduce the real economy's financing costs. Also, a cut may put pressure on banks' net interest margins [45][46] 3.4 Impact on the Bond Market - The probability of reserve requirement ratio and interest rate cuts is increasing marginally, but it is not a high - probability event. Reserve requirement ratio cuts and cuts in structural monetary policy tools may come first [48] - If a reserve requirement ratio cut occurs, it may drive down short - term and certificate of deposit rates. If an interest rate cut occurs, the magnitude is crucial, and the bond market may experience a small decline in interest rates, but the downward space is limited by the current low - interest rate level and policy imagination space brought by the "14th Five - Year Plan" [49][50]

Core Viewpoint - The central bank has signaled a commitment to maintaining liquidity stability by increasing the medium-term lending facility (MLF) by 900 billion yuan, marking the eighth consecutive month of such actions in 2023 [1] Group 1: Central Bank Actions - On October 27, the central bank conducted a substantial increase in MLF, totaling 900 billion yuan, indicating ongoing efforts to support liquidity [1] - The central bank's actions are seen as a balance between "risk prevention" and "stabilizing expectations," suggesting a cautious approach to monetary policy [1] - The announcement to resume open market operations for government bonds on the same day led to a significant decline in bond yields [1] Group 2: Market Implications - The coordinated use of multiple monetary tools is expected to ensure a smooth transition across the month-end period, contributing to a generally stable liquidity environment [1] - The overall liquidity condition is anticipated to remain "stable with a slight easing" as a result of these measures [1]

Group 1: Open Market Operations - The central bank conducted a 7-day reverse repurchase operation on October 27, with a fixed rate and a total amount of 337.3 billion yuan, at an interest rate of 1.40% [1] - On the same day, 189 billion yuan of reverse repos matured, resulting in a net injection of 148.3 billion yuan [1] Group 2: Funding Conditions - The interbank market experienced a significant tightening, with overnight repurchase rates for deposit institutions rising over 13 basis points to 1.45% [3] - The overnight quotes in the anonymous click (X-repo) system exceeded 1.50%, indicating limited supply [3] - Despite the central bank's excess MLF rollover of 200 billion yuan and net reverse repo operations, the liquidity situation remains tight due to tax payments and month-end factors [3] Group 3: Interbank Certificates of Deposit - The latest transaction rate for one-year interbank certificates of deposit among major banks is around 1.68%, showing a slight decline from the previous day [6] Group 4: Government Bond Futures - The closing prices for government bond futures showed increases: 30-year contracts rose by 0.32%, 10-year by 0.15%, 5-year by 0.12%, and 2-year by 0.05% [12] Group 5: Economic Data - From January to September, the total profit of industrial enterprises above designated size reached 537.32 billion yuan, a year-on-year increase of 3.2% [14] - In September alone, the profit of these enterprises grew by 21.6% year-on-year [14]

Core Viewpoint - The People's Bank of China (PBOC) is maintaining a loose monetary policy by injecting liquidity through various tools, which is expected to alleviate funding pressures and stabilize market conditions [1][2]. Group 1: Monetary Policy Actions - On October 27, the PBOC conducted a 7-day reverse repo operation of 337.3 billion yuan at a fixed rate of 1.4% [1]. - The PBOC also executed a 1-year Medium-term Lending Facility (MLF) operation of 900 billion yuan, resulting in a net injection of 348.3 billion yuan after accounting for maturing instruments [1]. - The total net liquidity injection for October reached 600 billion yuan, maintaining a high level of liquidity similar to September [1]. Group 2: Government Debt and Financing - The PBOC's long-term liquidity support is aligned with government bond issuance, which is expected to reach a net financing scale of 1 trillion yuan in October [2]. - The introduction of 500 billion yuan in new policy financial instruments is anticipated to stimulate approximately 5 trillion yuan in effective investment, creating a demand for 2 to 2.5 trillion yuan in accompanying loans [2]. Group 3: Future Outlook - Significant amounts of reverse repos and MLFs are set to mature in the fourth quarter and January, totaling 5.6 trillion yuan and 1.9 trillion yuan respectively [3]. - The PBOC may consider reducing reserve requirements or purchasing bonds to further release liquidity, ensuring that market liquidity remains stable and abundant until year-end [3].

Investment Rating - The report maintains an "Overweight" rating for the steel and non-ferrous metals sectors [6] Core Views - The profitability of steel futures has dropped to its lowest level since 2015, indicating significant pressure on the steel industry [2][44] - The report suggests that the profitability of the steel sector is expected to recover to historical average levels due to regulatory support for the industry [4] Liquidity - The M1 and M2 growth rate difference in September was -1.2 percentage points, with a month-on-month increase of 1.6 percentage points [12] - The BCI small and medium enterprise financing environment index for September 2025 was 47.58, reflecting a month-on-month increase of 2.61% [19] Infrastructure and Real Estate Chain - The price of asphalt has reached a new low since February 2022, indicating challenges in the infrastructure sector [23] - The national average capacity utilization rate for blast furnaces was 89.94%, down 0.39 percentage points from the previous week [44] Industrial Products Chain - The operating rate of semi-steel tires is at a five-year high, suggesting strong demand in the tire sector [73] - The prices of major commodities showed mixed performance, with cold-rolled steel down 0.51% and copper up 1.94% [2] Sub-sectors - The main contract profit for steel futures has fallen to its lowest level since 2015, highlighting the need for strategic adjustments in the sector [2][44] - The price of graphite electrodes remains stable at 18,000 yuan/ton, with a comprehensive gross profit of 1,357.4 yuan/ton, down 4.26% [2] Export Chain - The new export orders PMI for China in September 2025 was 47.80%, reflecting a month-on-month increase of 0.6 percentage points [4] - The CCFI comprehensive index for container shipping rates was 992.74 points, up 2.02% from the previous week [4] Valuation Levels - The PB ratio for the steel sector relative to the broader market is currently at 0.53, indicating potential undervaluation [4] - The report notes that the cyclical sector, particularly oil and petrochemicals, has shown the best performance with a 4.33% increase [4]

Report Information - Report Type: Fixed Income Report - Release Time: October 27, 2025 - Analyst: Liang Weichao - SAC Registration Number: S1340523070001 - Email: liangweichao@cnpsec.com [2] Industry Investment Rating No relevant content provided. Core Viewpoints - Fourth - quarter bond market may move in a volatile manner. The 30 - year minus 10 - year Treasury spread has fully reflected the repair of risk preference, and the 10 - year minus 1 - year Treasury spread has also generally reflected it. The bond market currently has allocation value, but chasing the rise requires caution [3][10]. - The capital market is in a loose state, with stable and low capital prices and little seasonal fluctuation. It is expected to remain loose during the October tax period and month - end [3][11]. - The issuance pressure of inter - bank certificates of deposit (NCDs) in the fourth quarter mainly comes from seasonality, and the probability of significantly exceeding expectations is low. NCDs have high allocation value at the end of the year and may decline more than expected [4][17]. Summary by Directory 1. How to View the Pricing of Inter - bank Certificates of Deposit? - **Bond Market Outlook**: Fourth - quarter bond market may move in a volatile manner. The spreads have reflected risk - preference repair, and the bond market has allocation value. Supply pressure may ease, and there may be opportunities for monetary easing, but redemption pressure will persist. Chasing the rise of bonds requires caution [3][10]. - **Capital Market Situation**: The capital market is in a loose state, with capital prices at a stable low and little seasonal fluctuation. This is due to the central bank's careful liquidity arrangements and the relatively loose and smooth - flowing bank liabilities. It is expected to remain loose during the October tax period and month - end [3][11]. - **Analysis of NCDs' Net Financing Decline**: Some investors are worried about the continuous negative net financing of NCDs since the third quarter. This decline is consistent with the state of the bank's broad liability gap and is also due to the substitution effect of the central bank's medium - and long - term liquidity injection [13]. - **NCDs' Supply Pressure in the Fourth Quarter**: The issuance pressure of NCDs in the fourth quarter mainly comes from seasonality, and the probability of significantly exceeding expectations is low. Although there is still some supply pressure at the end of the year, the probability of negative feedback is not high. The NCDs' interest rate is in a high - allocation - value range and may decline more than expected at the end of the year [4][17].

Group 1: Open Market Operations - The central bank announced a 168 billion yuan 7-day reverse repurchase operation on October 24, with a fixed rate of 1.40% and a total bid amount of 168 billion yuan, resulting in a net injection of 32 billion yuan for the day after accounting for 164.8 billion yuan of reverse repos maturing [1] - For the week of October 27-31, a total of 867.2 billion yuan in reverse repos will mature, along with 700 billion yuan in MLF maturing on Monday and 500 billion yuan in 182-day reverse repos maturing on Wednesday [1] - To maintain ample liquidity in the banking system, the central bank will conduct a 900 billion yuan MLF operation on October 27, with a one-year term [1] Group 2: Funding Conditions - The interbank market remains balanced, with overnight repo rates for deposit institutions stable around 1.32%, while non-bank institutions are borrowing at rates between 1.43% and 1.45% [3] - Market optimism regarding funding stability is supported by the central bank's actions, despite potential short-term liquidity tightening due to tax periods and month-end factors [3] - The latest overnight financing rate in the U.S. is reported at 4.21% [3] Group 3: Interbank Certificates of Deposit - The latest transaction rate for one-year interbank certificates of deposit among major banks is stable at 1.68% [6] Group 4: Bond Market Overview - The yields on major interbank government bonds show slight fluctuations, with the 1-year yield at 1.4700%, 5-year at 1.6050%, and 10-year at 1.7100% [8] - The 30-year main contract for government bonds closed down 0.25%, while the 10-year and 5-year contracts fell by 0.06% and 0.05%, respectively [11] Group 5: Recent Debt Issuance - Shandong Province plans to issue 16.4274 billion yuan in government special bonds on October 30, while Jiangxi Province will issue 63.2003 billion yuan in local bonds on the same day [16] - Meituan plans to raise 9 to 10 billion yuan through the issuance of dim sum bonds [17]

Core Viewpoint - The People's Bank of China (PBOC) announced a 900 billion yuan MLF operation to maintain liquidity in the banking system, with a net injection of 200 billion yuan in October, aligning with market expectations [1][4]. Group 1: Monetary Policy and Liquidity Management - The PBOC's MLF operation reflects a coordinated effort between monetary and fiscal policies to support government bond issuance and meet credit demand from enterprises and households [4][5]. - The central bank's continued injection of medium-term liquidity is a response to rising market interest rates and tightening liquidity in the banking system, aiming to stabilize market expectations [4][5]. - The total amount of long-term liquidity remains unchanged despite a slight decrease in the net MLF injection to 200 billion yuan, marking the eighth net injection this year [5][6]. Group 2: Economic Outlook and Future Expectations - Analysts expect the PBOC may implement a new round of reserve requirement ratio (RRR) cuts in the fourth quarter to further support economic growth and stabilize employment [7][8]. - The necessity for increased monetary policy support is rising due to external uncertainties and the high base effect from last year's policies [7][8]. - The overall liquidity in the market is expected to remain stable and ample, with limited upward pressure on market interest rates towards the end of the year [7][8]. Group 3: Loan Growth and Sector Support - In the third quarter of 2025, fixed asset loans increased by 5.06 trillion yuan, with a total balance of 77.55 trillion yuan, reflecting a year-on-year growth of 7% [9][10]. - The balance of loans to small and micro enterprises reached 36.09 trillion yuan, growing by 12.2% year-on-year, indicating strong support for this sector [10]. - The PBOC's focus on supporting technology-oriented small and medium enterprises is evident, with a loan balance of 3.56 trillion yuan, growing by 22.3% year-on-year [10].

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - Amidst complex international situations and ongoing Sino-US negotiations, the domestic index trend remains relatively independent. The release of the "15th Five-Year Plan" emphasizes scientific and technological innovation and domestic demand expansion, leading to a significant rebound in the technology sector. In the long - term, the domestic market is driven by liquidity, with continuous inflows of incremental funds, and the stock index has upward momentum after consolidation [3]. - The US has entered a new interest - rate cut cycle, which is conducive to RMB appreciation and foreign capital inflows. Current policies to stabilize the capital market are positive, and new technologies and consumption are driving the economic outlook to stabilize and recover. After the risk - free rate drops to a low level, long - term funds and retail investors will enter a new investment cycle. It is recommended to focus on technology - growth sectors such as semiconductors and AI computing power, and also pay attention to the rotation value of low - valuation defensive sectors like finance (securities) and consumption [4]. Summary by Directory 1. Market Performance - This week, domestic stock indices rebounded significantly, with the Shanghai Composite Index hitting a new high for the year. The Nasdaq rose 2.32%, the S&P 500 rose 1.92%, the Hang Seng Tech Index rose 5.28%, the Shanghai Composite Index rose 2.88%, the ChiNext Index soared 8.05%, and the STAR 50 Index rose 7.27% as of October 24, 2025. Most of the 81 Shenwan primary industry indices rose, with the communications, electronics, and power equipment sectors rising significantly, while only the agriculture, forestry, animal husbandry, and food and beverage sectors declined [11][15]. 2. Liquidity - In September, government bonds supported social financing, the return of wealth management funds boosted M2, while M1 remained sluggish. The "gap" between M1 and M2 continued to narrow. The core support for the increase in social financing in September came from government bond issuance, while weak RMB loans were the main drag. The recovery of real - economy financing demand still needs time. In September, the new social financing increment was 3.76 trillion yuan, a year - on - year decrease of 372.2 billion yuan, and the stock of social financing balance was 402.19 trillion yuan, a year - on - year increase of 8.0%. The growth rate slightly declined by 0.1 percentage points from the previous month. The new government bonds in September were 1.54 trillion yuan, a year - on - year increase of 543.7 billion yuan [13][16]. - The fund rate (DR007) remained low, and 300 billion yuan of MLF was net - injected in September. The yield of the 10 - year Treasury bond was around 1.7%. As of the end of September, the M2 balance was 209.48 trillion yuan, a year - on - year increase of 6.8%, and the M1 balance was 82.82 trillion yuan, a year - on - year decrease of 7.4% [16]. 3. Trading Data and Sentiment - This week, trading volume in the two markets decreased, but the heavy trading on Friday drove the index to rebound. The average daily trading volume (MA5) of the two markets remained around 2 trillion yuan, and liquidity is an important factor supporting the current index and needs continuous monitoring. The number of new accounts opened showed fluctuations from January to August, with 1.57 million in January, 2.88 million in February, 3.06 million in March, 1.92 million in April, 1.555 million in May, 1.6464 million in June, 1.9636 million in July, and 2.6503 million in August [23][25]. 4. Index Valuation - As of October 24, 2025, the absolute valuation of the index is at a low level. The latest PE of the Shanghai Composite Index is 16.94, with a quantile of 87.30, and the PE of the entire A - share market is 22.59, with a quantile of 88.43. Among the major stock indices, the valuation quantiles are in the order of CSI 1000 < CSI 500 < SSE 300 < SSE 50 [32]. 5. Index Industry Weights - As of June 30, 2025, in the SSE 50, the weights of the banking, non - banking finance, and food and beverage sectors are relatively high, at 21.34%, 15.48%, and 13.88% respectively, and the electronics industry has become the fourth - largest weighted industry. In the SSE 300, the weights are more dispersed, with the top three weighted industries being banking, non - banking finance, and electronics. In the CSI 500, the top three weighted industries are electronics, pharmaceutical biology, and non - banking finance. In the CSI 1000, the top three weighted industries are electronics, pharmaceutical biology, and computer [45][46]. 6. Other Overseas and Domestic Policy Tracking - Domestic policy tracking: In 2025, the government work report and the Two Sessions in March set the economic growth target at 3% and the CPI increase at around 2%. A moderately loose monetary policy and a more proactive fiscal policy were proposed, with a deficit ratio of about 4% and the issuance of 1.3 trillion yuan in ultra - long - term special treasury bonds. In May, the reserve requirement ratio was cut by 0.5 percentage points, the policy rate was lowered by 0.1 percentage points, and the provident fund rate was cut by 0.35 percentage points. A 500 - billion - yuan loan for service consumption and elderly care was established. In September, the achievements of the financial industry during the "14th Five - Year Plan" were summarized, and further reforms in the capital market, such as those in the STAR Market, ChiNext, and Beijing Stock Exchange, were promoted [50][51]. - Overseas policy tracking: The US is about to enter a new interest - rate cut cycle, with a 25 - BP cut in September. As of October 19, the probability of another rate cut in October by the Fed exceeded 30%, and there are still two potential rate cuts this year. China has implemented "long - arm jurisdiction" and strengthened rare - earth controls, which has led to Trump's counter - measures of imposing additional tariffs. A video call was held between China and the US on October 18 [52][53].

Core Viewpoint - The People's Bank of China (PBOC) is injecting 900 billion MLF (Medium-term Lending Facility) to provide liquidity to banks, which is expected to stabilize financing costs for enterprises and support the A-share market [1][3]. Group 1: Monetary Policy Impact - The injection of 900 billion MLF is essentially a measure to alleviate liquidity constraints for banks, ensuring they do not tighten credit excessively [3]. - This policy action is aimed at maintaining stable expectations in the market, indicating that there will not be sudden disruptions in funding availability [3]. Group 2: Investment Strategy - Long-term investors should not treat this monetary policy as a short-term trading opportunity but rather as a signal to hold onto fundamentally sound stocks with reasonable valuations [3]. - The focus should be on following policy signals and core logic to maintain stable long-term positions in the market [3].