JP Morgan released a report expressing a net positive view on the measures announced at a joint press conference held this morning (7th) by Chinese financial regulators, including the People’s Bank of China (PBOC), the National Financial Regulatory Administration (NFRA), and the China Securities Regulatory Commission (CSRC).

First of all, the PBOC will pump approximately RMB2.1 trillion in liquidity through a reserve requirement ratio (RRR) cut and expanded re-lending tools. Secondly, a 10 bps policy rate reduction aligns with expectations, with JP Morgan having factored a 30 bps cut in the 2025 loan prime rate (LPR) into its earnings forecasts.

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Thirdly, policymakers highlighted the use of credit insurance tools to support tech companies, SMEs, and enterprises affected by the trade war. Combined with enhanced liquidity support (via re-lending tools and tech bond issuance) and rate cuts, these tools alleviate concerns over loan asset quality for domestic banks, with limited impact on JP Morgan’s NIM forecasts.

Additionally, liquidity injections and rate cuts may suppress China’s 10-year government bond yields, helping protect banks’ NIMs. JP Morgan’s top picks in the Chinese banking sector are CCB (00939.HK)  -0.070 (-1.012%)    Short selling $105.93M; Ratio 11.533%   and CM BANK (03968.HK)  -0.350 (-0.713%)    Short selling $107.56M; Ratio 19.490%   .

According to JP Morgan, the PBOC increased liquidity by RMB1 trillion through the 50 bps RRR cut, along with another RMB300 billion in refinancing tools to support technological innovation, RMB500 billion in refinancing tools to support services for consumers and the elderly, and RMB300 billion in refinancing tools to support the agricultural industry and small and micro enterprises, adding a combined total of RMB2.1 trillion to the system's liquidity.

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The rate cuts were in line with the broker's estimation, but the incremental amount of refinancing tools exceeded expectations.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-05-19 12:25.)