JPMorgan: Central bank lowering policy interest rate as expected, preferred options are Construction Bank and Merchants Bank.

J.P. Morgan released a research report stating that the People's Bank of China and the China Banking and Insurance Regulatory Commission held a joint press conference the previous day to announce the launch of a basket of market-stabilizing financial policies. It is expected to have a positive impact, as the People's Bank of China will inject approximately 2.1 trillion yuan into the market through reserve requirement cuts and expanding various types of refinancing tools. Policy rates have been reduced by 10 basis points, which is in line with expectations. The 25 basis point reduction in structural monetary policy tool rates will lower banks' debt costs and increase liquidity support, leading to a decrease in interest rates and alleviating concerns about the asset quality of bank loans. J.P. Morgan stated that the overall impact on net interest margin forecasts after the introduction of the market-stabilizing financial policies is not significant. It is expected that liquidity injections and interest rate cuts may suppress the yield of Chinese 10-year government bonds, providing a guarantee for bank interest margins. Among domestic banks, China Construction Bank and China Merchants Bank are preferred.