China's reserve requirement cut provides liquidity, "Fan Hua" reports positive earnings, leading to a sharp rise in 601 constituent stocks.

In recent times, the U.S. stock market, Japanese stock market, and Taiwanese stock market have repeatedly reached new highs. However, the Chinese stock market has not shown the expected post-lockdown rally. Instead, there have been ongoing crises in the real estate sector. Following Evergrande Group's bankruptcy filing in the U.S. at the end of last year, China's largest real estate developer, Country Garden, has also encountered issues. Foreign capital has been fleeing, and on January 24th, Pan Gongsheng, the Governor of the People's Bank of China, announced a 0.5% reduction in the reserve requirement ratio starting from February 5th to provide long-term liquidity to the market, leading to a surge in stocks of 601 constituents.

2015 was the worst year! Chinese stock market has been sold off for ten consecutive weeks. Is Country Garden about to default?

Stock Market Continues to Decline, People's Bank of China Cuts Reserve Ratio to Provide Liquidity

One of China's major stock markets, the Shanghai Composite Index, has been on a downward trend since 2022, even lower than the levels during the pandemic.

In response, China has rolled out a series of measures to rescue the stalled property market. Chinese Premier Li Keqiang, at the World Economic Forum held in Switzerland recently, assured China's commitment by announcing a higher economic growth rate for China in 2023 than the initial 5% target set at the beginning of the year. This move aims to attract more foreign investment into China.

The Governor of the People's Bank of China, Pan Gongsheng, announced on January 24 that the reserve requirement ratio would be reduced by 0.5% starting from February 5, providing the market with long-term liquidity of around 1 trillion Chinese Yuan, approximately 4.4 trillion New Taiwan Dollars. This finally led to a rise in the stock market, with the Shanghai Composite Index rising by 2.75% this week. However, the index is still down by 10% over the year and has yet to recover to pre-pandemic levels.

Various Stocks Surge, 601 Stocks Lead the Way

The popular Chinese drama "Blossoms" has gained much attention recently. The male lead, played by Hu Ge, profits greatly by speculating on stocks with the code 601 in the drama. Coincidentally, the recent surge in the Chinese stock market has been led by stocks starting with 601.

The announcement of the reserve ratio cut by the People's Bank of China on the 24th triggered a sharp rise in the Shanghai Composite Index, with 601 series stocks leading the way. This is mainly due to the statement by the State-owned Assets Supervision and Administration Commission of the State Council on the 24th, indicating further research into incorporating market value management into the performance evaluation of central enterprise leaders.

Stocks with the code starting with 601, including strong performers like China Petroleum (601857), China Communications Construction (601800), China Railway Construction (601186) surging by 6%, and China Telecom (601728) rising by over 5%, all contributed to the strong market rally. Investors jokingly refer to this surge as a prediction made by "Blossoms" ahead of time, accurately reporting the hand they were dealt.