CSC Securities Research | By Xia Fanjie & Li Jiajun The global interest rate cut cycle is entering its second half in 2026, with macro liquidity characterized by two core features: "resonant internal and external easing" and a shift "from extraordinary to normal." On the exchange rate front, the US dollar faces pressure, while Renminbi appreciation supports a stronger A-share market. In terms of stock-bond reallocation, prolonged low interest rates are reshaping the logic of asset allocation; the medium-term "stock-bond seesaw" effect is expected to further bolster A-share performance. Additionally, household "deposit relocation" reallocation demand could become the largest marginal increment to the market. From a policy perspective, the capital market's status is being upgraded in the post-real estate era, positioning it as a core hub for economic development and resource allocation, with continuous optimization of the market's funding ecology laying a foundation for high-quality development.
Overall, the global rate-cutting cycle enters its second half in 2026, maintaining a favorable macro liquidity environment, albeit with gradually converging marginal policy improvements. Global macro liquidity exhibits two key features: synchronized domestic and external easing, and a transition from extraordinary measures to normalization. Globally, the Fed is expected to continue cutting rates by 50 basis points, with balance sheet expansion resuming in December 2025 to alleviate USD funding pressures, coupled with cooling global inflation allowing central banks to maintain accommodative policies. Domestically, monetary policy is shifting from "extraordinary counter-cyclical adjustment" towards "strengthening both counter-cyclical and cross-cyclical adjustment efforts." On the exchange rate front, Fed rate cuts and worsening US fiscal conditions are likely to weaken the dollar. The Renminbi is expected to maintain an appreciating trend, supporting A-shares by attracting foreign inflows, boosting risk appetite and valuation anchors, and improving corporate profitability for relevant firms. Regarding the interest rate environment, persistently low rates are reshaping stock-bond allocation logic, enhancing the appeal of equities and fueling the continued explosion of "fixed-income plus" products. The medium-term "stock-bond seesaw" effect may conversely channel funds into the equity market, further supporting A-shares. Furthermore, against the backdrop of broad declining interest rates, the maturity of substantial previous time deposits in 2026 could make household "deposit relocation" reallocation demand the largest marginal market increment. Policy-wise, the capital market's status is significantly upgraded, with continuous optimization of its funding ecology laying the groundwork for high-quality development. In the post-real estate era, the capital market's role is markedly enhanced, becoming a central pivot for economic development and resource allocation. The September 2024 Politburo meeting explicitly prioritized revitalizing the economy and reversing balance sheet deflation expectations, with financial asset prices being a key component. As the real estate sector's role adjusts, the capital market is assuming the crucial mission of household wealth allocation. In terms of funding ecology, supply and demand structures are becoming more balanced and rational. Policies guide listed companies to strengthen dividend mechanisms and improve earnings quality, making shareholder returns an inevitable trend, while comprehensively tightening major shareholder reductions. The market is transitioning from "financing-oriented" to a "investment-financing balance," with overall capital consumption expected to be limited, thereby enhancing market attractiveness and stability.
Macro Liquidity: Resonant Internal and External Easing Global Rate-Cut Cycle's Second Half: From "Extraordinary" to "Normal" From a macro liquidity perspective, 2026 lies in the second half of the global rate-cutting cycle, expected to exhibit two characteristics: resonant internal and external easing, and a shift from "extraordinary" to "normal" accommodation. Globally, the Fed is projected to continue its easing cycle in 2026, with monetary policy navigating "political pressure and inflation risks" amid mid-term election pressures and receding inflation; markets currently anticipate a further 50 BP cut next year. Global inflationary pressures have cooled, with the proportion of developed countries having inflation rates exceeding 4% dropping to 6.7% by November, allowing central banks broadly to maintain accommodative policies. From the Fed balance sheet perspective, the "quantitative tightening" conducted from May 2022 to November 2025 aimed to absorb excess liquidity previously released via "quantitative easing." The resumed balance sheet expansion in December 2025 marks a significant shift from "extraordinary" to "normal" monetary policy. As a technical liquidity operation implemented through Reserve Management Purchases (RMP), its core goal is to replenish banking system reserves and ease money market tensions; for global liquidity, this policy will alleviate USD funding pressures and short-term support for risk asset valuations.
In 2026, domestic policy will continue the current "appropriately accommodative" monetary policy direction, with the policy tone shifting from the December 2024 Politburo meeting's "strengthen extraordinary counter-cyclical adjustment" to the December 2025 Central Economic Work Conference's "increase counter-cyclical and cross-cyclical adjustment efforts," also reflecting a transition from "extraordinary" to "normal." Specific policy implementation will focus on three main points: 1) Prioritizing promoting stable economic growth and reasonable price回升 as key considerations for monetary policy, a new formulation in this year's meetings. Monetary policy will enhance forward-looking and scientific adjustment, maintain ample liquidity, keep social financing conditions relatively loose, promote low comprehensive social financing costs, and synergize with other policies to strive for goals like economic growth and price回升. 2) Flexibly and efficiently utilizing various monetary policy tools. The toolbox includes RRR and interest rate cuts, as well as other short, medium, and long-term liquidity injection tools. Next year will see flexible combination and efficient use of multiple tools to match the growth of aggregate financing and money supply with economic growth and price level targets. 3) Strengthening support for key areas like domestic demand expansion, technological innovation, and SMEs. Continue effectively using structural monetary policy tools, focus on smoothing monetary policy transmission mechanisms, and persistently enhance the quality and efficiency of financial services to the real economy. Simultaneously, continue balancing internal and external relations, maintaining the RMB exchange rate's basic stability at a reasonable and equilibrium level.
USD Still Under Pressure, RMB Appreciation Supports A-Share Strength In 2026, against the backdrop of continued Fed rate cuts and deteriorating US fiscal conditions, the US dollar may maintain weak performance. Meanwhile, due to policy guidance, strong exports, and capital inflows, the Renminbi is expected to continue appreciating. Short-term, RMB strength can be seen as a catch-up; using the China-US 3-month government bond yield spread as a reference, if maintained at current levels, the RMB exchange rate could appreciate from around 7.0 to 6.8. Considering potential further Fed easing, we believe the RMB has room for further appreciation in 2026.
This RMB appreciation cycle is expected to support A-share strength through three core logics: First, appreciation may increase foreign willingness to allocate to RMB assets, attracting inflows into the A-share market. Second, stable exchange rate expectations benefit market risk appetite and the upward shift of the A-share valuation anchor; historically, A-shares performed better during RMB appreciation phases. Third, RMB appreciation benefits the profit improvement of some companies, primarily through logic including high foreign currency debt, high import dependency, and high overseas investment. Therefore, RMB strength is likely to push the overall A-share index higher while also driving better performance in sectors heavily held by foreigners and those sensitive to exchange rates.
Stock-Bond Reallocation: Interest Rate Environment Favors Equity Assets Prolonged Low Interest Rate Environment: Enhanced Equity Appeal, "Fixed-Income Plus" Products Boom Since 2024, domestic interest rates have continuously declined, creating a "low rates, easy money" macro environment that reshapes the risk-reward profile of stocks and bonds, driving a shift in allocation strategies:
Bond Allocation: The traditional "buy-and-hold" model becomes unsustainable. Allocation strategies gradually shift from "hold to maturity" to "coupon strategy dominance," while duration strategies begin to contract. New allocations focus mainly on 3-5 year medium-to-short duration to avoid long-end rate rebound risks.
Equity Allocation: Low rates reduce the discount rate for equities, coupled with valuation repair space, significantly enhancing the stock market's appeal. High-dividend assets and tech/growth sectors benefit most. The prolonged low-rate environment makes high-dividend assets "bond-like substitutes," attracting increased allocation from long-term funds like social security and insurance. Currently, the dividend yield spread (dividend yield minus 10-year government bond yield) for the CSI Dividend Index and the CSI 300 Index are at their 80th and 90th percentiles over the past decade, respectively, indicating high allocation attractiveness. Conversely, technology and high-end manufacturing also benefit from policy support and lower financing costs, with low discount rates lifting the valuation anchor for growth sectors.
Multi-Asset Allocation: "Fixed-income plus" products experience explosive growth. Yields on money market funds, represented by Yu'ebao, have plummeted, testing the "below 1%" level. Persistently low yields fail to meet household allocation needs, making increased allocation to risk assets an inevitable trend. "Fixed-income plus" products, as a transition category from fixed income to equities, are absorbing substantial household "deposit relocation" demand and are a key focus for distribution channels and revenue generation. After significant development in 2025, "fixed-income plus" products are expected to continue rapid growth in 2026.
Medium-Term Rate Rebound: "Stock-Bond Seesaw" Further Supports A-Shares Although China remains in a low-rate environment long-term, long-end rates have risen since the second half of 2025, with the 10-year and 30-year government bond yield anchors increasing from 1.65% and 1.85% to 1.85% and 2.20%, respectively. What impact might this have on A-shares? The long-end rate rebound stems mainly from cooled expectations for further RRR/rate cuts and marginal repair of inflation expectations under "anti-involution" policies, with a more direct cause being supply pressure for ultra-long bonds and insufficient allocation demand. We believe the impact of a significant long-bond decline on the equity market is relatively limited. Firstly, current rates partially reflect supply pressure and inflation expectations; further increases require significant fundamental improvement support. Secondly, short-end rates remain relatively stable, having little practical impact on market funding liquidity. Finally, while rising long-end rates may cause some risk appetite disturbance, a fund diversion effect also exists. Given the clear profitability effect in stocks versus high volatility in bonds, the "stock-bond seesaw" effect could channel funds into equities, further supporting A-shares.
Household Excess Deposits Entering the Market Could Become the Largest Marginal Increment Since 2019, Chinese household deposits have grown substantially, accelerating further from 2022 to mid-2023, accumulating a vast scale of excess deposits over six years. By November 2025, domestic RMB deposits in the household sector exceeded 163 trillion yuan; extrapolating based on the 2008-2018 linear trend, the "excess deposit" size might reach 60 trillion yuan. In last year's strategy report, we analyzed the latest trends in household excess deposits: the formation speed of excess deposits has begun to slow, partly because the "darkest hour" of household expectations for future economic conditions may have passed, and partly because the myth of real estate, the largest component of household financial assets, has been broken. Therefore, against the backdrop of broad interest rate declines, with a large volume of previous time deposits maturing in 2026, household "deposit relocation" reallocation demand could become the largest marginal market increment. During this process, funds are expected to flow mainly into insurance, wealth management products, and "fixed-income plus" products with lower "equity content," with a smaller portion directly entering the stock market or allocated to ETFs, public/private active equity products. In fact, household deposit growth noticeably slowed in H2 2025, suggesting some deposits have already shifted to other asset allocation products; the behavior of household deposit relocation may have just begun.
Capital Market Policy: One Core and Three Basic Points One Core: Post-Real Estate Era, Capital Market Status Significantly Upgraded Reviewing policy developments from 2024-2025, the central government's policy tone for the capital market gradually evolved from "stabilizing markets, preventing risks" to "improving quality/efficiency, strengthening function," forming a four-dimensional framework of "enhanced institutional inclusivity — medium/long-term fund entry — serving tech innovation — coordinated risk prevention." In H1 2024, capital market policy focused on "stabilizing markets, risk prevention, strengthened regulation." By July 2024, the Politburo meeting proposed "boosting investor confidence," and the September meeting called for "striving to revitalize the capital market,"首次 elevating market revitalization as a key task. The December Central Economic Work Conference placed "stabilizing property and stock markets" in the general statement, indicating a major shift in policy objectives. The March 2025 Government Work Report proposed "strengthening strategic force reserves and market-stabilizing mechanisms." The April 2025 Politburo meeting called for "continuously stabilizing and enlivening the capital market," reflecting a deepening from "stabilize" to "enliven." The July 2025 meeting further required "consolidating the capital market's stabilizing and improving trend," marking a progression from "stabilization" to "consolidation and quality improvement."
The September 2024 Politburo meeting explicitly prioritized revitalizing the economy and reversing balance sheet deflation expectations, with financial asset prices being a key component. The PBOC's urban depositor survey shows that the recent rise in the household savings rate cannot be fully explained by a decline in the consumption rate; indeed, the consumption rate has remained relatively stable overall, with investment behavior, including real estate, having a greater impact on savings behavior. In the post-pandemic era, household willingness to spend on travel and social/cultural entertainment providing emotional value recovered first. Stimulated by national subsidy programs like trade-ins, willingness to spend on major durable goods began recovering from H2 2024, with home purchases being the item迟迟仍未明显恢复.
Looking back at 2016-2019, as the economy entered an upward cycle, supply-side reforms took effect, and industries like mobile internet flourished, alongside rising housing prices, expansion of non-standard investments like trusts, and performance of stocks/funds, "consumption upgrade" became a phenomenal social trend, illustrating the "wealth effect" of assets. Observing 50 major Chinese cities: in 2014, the real estate market exhibited a wealth effect—cities with higher housing cost burdens had higher consumption propensities; by 2020, the property market showed a drag effect—cities with higher housing cost burdens had lower consumption propensities. Subsequent pandemic impacts, falling house prices, and platform economy anti-monopoly measures worsened expectations, especially for the emerging middle class, leading to persistently weak domestic demand during recovery. The July 2023 Politburo meeting concluded that significant changes had occurred in China's real estate supply-demand relationship.
How to understand "de-real-estatization"? On one hand, after the potential represented by real estate during high-growth periods gradually fades, future efforts must focus on discovering new economic potential matching medium-speed growth. On the other hand, part of real estate's investment function is being assumed by financial markets, with household wealth allocation shifting from physical to financial assets. Real estate, hailed as the "mother of cycles," profoundly impacts upstream (steel, non-ferrous metals, building materials, construction, machinery) and downstream (appliances, furniture, decoration) industries. Long-term, real estate depends on demographics, ultimately stemming from housing demand. With population entering a decline and urbanization slowing, the real estate super-cycle has essentially peaked, entering a gentle downward phase. Going forward, the scenario of real estate driving widespread prosperity across industries may not return. Prosperity will likely concentrate in a few emerging industries, contributing to overall economic growth. How can society share the prosperity of these few emerging industries? The US stock market offers one answer: it connects the macroeconomy, corporations, and households, becoming a core tool for distributing economic growth dividends.
Three Basic Points: Shareholder Returns an Inevitable Trend, Funding Ecology Significantly Improved The overall funding ecology of the A-share market is changing. Shareholder returns are becoming an inevitable trend, enhancing investor confidence through dividends and attracting medium-to-long-term capital. Since 2023, regulatory policies have gradually built a dividend regulatory framework of "mandatory disclosure + restraint and punishment," forming a dividend guidance system of "basic institutions + specialized guidance + market incentives," core directions being strengthening hard constraints on dividend regulation and encouraging cash dividends and ratio increases. Simultaneously, policies explicitly guide listed companies to increase dividend frequency, optimize timing, promote mid-term and quarterly dividends as常态, and make dividends a core indicator for SOE市值 management and performance assessment. These policies collectively establish a normalized, diversified, and predictable dividend mechanism for listed companies. Market-wide dividend totals repeatedly hit record highs, frequency increased significantly, stability improved, and the appeal of high-dividend assets strengthened, reinforcing a market culture of "returning value to investors." In 2024, the proportion of listed companies with cash dividend ratios exceeding 30% reached 76.7%, with SOEs and blue chips particularly enhancing their payout efforts.
Financing: Coordinated Balance, Reduced Volume but Improved Quality, Optimized Structure Since 2023, regulators have frequently mentioned "improving the coordinated function of investment and financing in the capital market." Centered on balancing primary and secondary markets, a policy system of "precise control, structural optimization" was built around IPOs and refinancing, including阶段性 tightening IPO pace while optimizing financing structure, forming an overall orientation of "strict entry gate, supporting tech innovation, strengthening quality supervision," achieving the effect of resource concentration in high-quality firms. From 2020-2022, annual A-share IPO规模 was around 500 billion yuan; from 2023-2025, IPO fundraising fell from around 360 billion yuan to 66 billion before rebounding to around 130 billion yuan, with funds concentrating in tech innovation fields like semiconductors and electronic equipment, significantly enhancing the capital market's role in serving the real economy and innovation.
Reductions: Comprehensive Tightening Since 2023, regulators have built a shareholder reduction policy system of "full-chain constraints +穿透式 supervision." The core trend involves strengthening restrictions on major shareholder reductions, comprehensively blocking circumvention channels, and increasing violation costs, with the core goal of maintaining market stability, protecting minority investors, and fostering a market ecology where "reductions have rules, cashing out has limits." Policies form a complete "disclosure - restriction - accountability" chain, from pre-reduction disclosure to in-process比例 limits and post-violation追责. By linking reductions to company performance (stock price, dividends), they guide listed companies to focus on long-term value and shareholder returns. Simultaneously, they regulate "creative reduction" methods like divorce, securities lending, judicial auctions, plugging loopholes穿透ly, and establishing clear mechanisms for repurchasing违规减持 shares. The series of new rules effectively curb无序减持, achieving policy effects of骤降 reduction scale, optimized market ecology, and enhanced long-term capital confidence. By end-2025, 2,300 listed companies (42% of all A-shares) faced reduction restrictions, with many (25%) failing to meet dividend criteria. By board, 40% of Main Board and ChiNext companies faced restrictions, exceeding 50% for STAR Market and BSE.
Previously, frequent IPO, refinancing, and major shareholder reduction activities created a certain "blood-sucking effect" on market liquidity. However, with the implementation of series of new rules since 2023, the A-share funding ecology has undergone substantive change, with the trend towards emphasizing shareholder returns becoming increasingly evident.
2024 A-share total fundraising was about 313.5 billion yuan, the first time below 1 trillion in nearly a decade; 2025 fundraising, excluding the 520 billion yuan定向增发 by the four major banks in June, was about 500 billion yuan.
Major shareholder reductions totaled over 1.3 trillion yuan during 2019-2021; post-new rules, requirements严格, leading to over 50 billion yuan in net增持 in 2024 and reductions of about 250 billion yuan in 2025.
Dividend and回购规模 increased yearly, exceeding 2 trillion yuan combined for the first time in 2024 and over 2.2 trillion yuan in 2025.
Looking ahead to 2026, with normalized recovery in corporate financing, total market fundraising is expected to orderly recover to around 800 billion yuan. As markets修复上涨, reduction scale may expand to around 400 billion yuan, but under various regulatory constraints, the substantive impact of compliant reductions is relatively limited. Encouraged by policies and led by SOEs, A-share dividend/buyback规模 is expected to grow further; projecting based on the recent 5-year CAGR, 2026规模 could reach 2.5 trillion yuan. Overall, the market is expected to maintain a trillion-yuan级别 funding surplus.
Seizing Era Opportunities and Policy Dividends Overall, the global rate-cutting cycle enters its second half in 2026, maintaining a favorable macro liquidity environment, albeit with gradually converging marginal policy improvements. Global macro liquidity exhibits two key features: synchronized domestic and external easing, and a transition from extraordinary measures to normalization. Globally, the Fed is expected to continue cutting rates by 50 basis points, with balance sheet expansion resuming in December 2025 alleviating USD funding pressures, coupled with cooling global inflation allowing central banks to maintain accommodative policies. Domestically, monetary policy is shifting from "extraordinary counter-cyclical adjustment" towards "strengthening both counter-cyclical and cross-cyclical adjustment efforts," targeting stable growth and price回升, maintaining ample liquidity via diverse tools, and supporting key areas like domestic demand and innovation. On the exchange rate front, Fed rate cuts and worsening US fiscal conditions are likely to weaken the dollar. Using the China-US 3-month government bond yield spread as a reference, if maintained, the RMB could appreciate from ~7.0 to 6.8, supporting A-shares by attracting foreign inflows, boosting risk appetite/valuation anchors, and improving corporate profits. Regarding the interest rate environment, persistently low rates reshape stock-bond allocation logic: bond strategies shift to coupon dominance and medium/short duration, equity appeal rises, "fixed-income plus" products boom; medium-term long-end rate rebounds, though driven by inflation expectations and supply pressure, have limited impact on A-shares, with the "stock-bond seesaw" potentially channeling funds into equities, further supporting trends. Furthermore, against broad rate declines, maturing time deposits in 2026 could make household "deposit relocation" demand the largest marginal increment. Policy-wise, the capital market's status is significantly upgraded, with continuous optimization of its funding ecology laying the groundwork for high-quality development. In the post-real estate era, the capital market's role is markedly enhanced, becoming a central pivot for economic development and resource allocation. The September 2024 Politburo meeting explicitly prioritized revitalizing the economy and reversing balance sheet deflation expectations, with financial asset prices being a key component. As real estate's role adjusts, the capital market assumes the crucial mission of household wealth allocation. Regarding funding ecology, supply/demand structures become more balanced. Policies guide listed companies to strengthen dividends and improve earnings quality, making shareholder returns inevitable, while comprehensively tightening major shareholder reductions. The market transitions from "financing-oriented" to "investment-financing balance," with limited overall capital consumption expected, enhancing attractiveness and stability. A series of policy measures collectively improve the capital market's funding environment and operational quality, strengthening its core function of serving the real economy, providing solid policy support for stable operation and structural opportunities.
(1) Macroeconomic volatility risk; global recovery pace is uncertain. If inflation rebounds exceed expectations or deflation pressures intensify, leading to adjustments in global accommodative policies, equity valuation and profit recovery may fall short. (2) Policy implementation falling short of expectations risk; if domestic counter-cyclical adjustment strength/timing disappoint markets, or capital market reforms/shareholder return mechanism optimization progress slowly, market funding ecology and risk appetite could be affected. (3) External environment uncertainty risk; unexpected Fed policy adjustments, intensified USD volatility, or escalated global geopolitical conflicts could trigger foreign capital flow volatility, impacting RMB asset stability and A-share performance.
Comments