Today, the central bank and the China Securities Regulatory Commission (CSRC) both unleashed major moves!

Central bank governor Pan Gongsheng announced three major policies at the meeting.

1. Reduce the reserve requirement ratio and policy interest rates, and drive down market benchmark interest rates.

The reserve requirement ratio will be lowered by 0.5 percentage points in the near future, providing about 1 trillion yuan in long-term liquidity to the financial market.

In addition, the 7-day reverse repurchase operation interest rate will be reduced by 0.2 percentage points, from the current 1.7% to 1.5%, guiding the loan market报价 interest rate and deposit interest rate to move down synchronously.

2. Reduce the interest rates on existing housing loans and unify the minimum down payment ratio for housing loans.

3. Create new policy tools to support the development of the stock market.

The most important policy today is the "Securities Fund Insurance Swap Convenience first phase scale of 500 billion, which can only be used to invest in the stock market."

It was also mentioned that this 500 billion is just the first phase, and there can be a second 500 billion and a third 500 billion in the future.

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I understand that this is a direct targeted release of funds to A-shares, right? $Shanghai Composite Index (SH000001)$Additionally, at the meeting, the Chairman of the China Securities Regulatory Commission (CSRC), Wu Qing, also announced a number of policies that are beneficial to the stock market.

I summarize them into three aspects:

1. Implementing various measures to improve the quality of listed companies and their investment value. Companies that have been trading below their net asset value for a long time need to formulate plans to enhance their value. Listed companies should use methods including dividends and share buybacks to reward investors.

2. A series of arrangements will be deployed to support medium and long-term capital entering the market, and to improve the institutional environment for long-term investment. This will encourage medium and long-term capital to enter the market, promote insurance institutions to engage in steadfast long-term investments, and refine the investment policies of the National Social Security Fund.

3. The CSRC will vigorously develop equity-based public funds, urge fund companies to correct their business philosophy, adhere to an investment return orientation, create more products that meet the needs of the public, and vigorously promote innovation in broad-based fund products.

Dear fund investors, do you feel like spring is finally coming?

Not long ago, when the CSI A500 ETF was launched with great enthusiasm, many investors complained, saying: We don't want indices, we want liquidity, we want confidence. (Including me.)

Last week, when the Federal Reserve unexpectedly cut interest rates, many people expressed confusion and disappointment because we did not immediately follow suit with a rate cut. (Including me.)

Now, though late, the liquidity and confidence everyone has been waiting for have arrived.

The giant $Moutai (SH600519)$ surged by over 7% today, and the mainstream broad-based indices have finally seen a general rise. Taking the $CSI 1000 ETF (SZ159845)$ with a scale of over 20 billion as an example, it closed up 2.69% in the morning, which is more than many large-cap CSI 300 ETFs and small-cap CSI 2000 ETFs.The CSI 1000 has risen significantly, and I believe this is not a strange occurrence.

1. In August of this year, it was evident that the GJD (Government-affiliated institutions) had changed their market support tactics—initially, they aggressively boosted the CSI 300, but later gradually shifted their focus to the CSI 1000.

This is a smart move by the GJD this year, as they finally realized that market support couldn't solely focus on large-cap stocks, as this would only exacerbate market panic and lead to a vicious cycle of selling off the numerous small and micro-cap stocks.

Shifting to support the CSI 1000 is indeed a wise decision. The CSI 500 is now more commonly perceived as mid-cap, while the CSI 2000 is explicitly small-cap. The CSI 1000 fits right in the middle, representing the mid-cap segment of the A-share market.

Due to being selected by the GJD, it has led to a surge in interest from large funds in various CSI 1000 ETFs.

Taking the CSI 1000 ETF (159845) as an example, according to JisiLu data, on July 31st of this year, the ETF's market share was 963.243 million units, and by September 23rd, it had grown to 1,173.643 million units, an increase of 21 million units in nearly two months.

Let me briefly show you the current situation of the CSI 1000 Index.

In terms of valuation, the CSI 1000 Index's current P/E ratio is 29 times, which is close to the cheapest valuation at the end of 2018.

Looking at industry weights, the largest sectors in the CSI 1000 Index are医药生物, electronics, computers, and power equipment, in that order. These are all industries that have seen significant declines this year, so it's not hard to understand why the CSI 1000 has fallen so sharply this year.

2. Based on the historical pattern of three "bear market bottom to bull market top" rebounds, the rebound amplitude of mid and small-cap broad indices like the CSI 1000 and CSI 2000 is significantly larger.However, the long-term impact of a policy's introduction is still uncertain at this point and requires subsequent economic data to provide more judgment.

In the short to medium term, however, the boost to market sentiment is significant.

If you want to take advantage of this small and medium-sized rebound, for ETFs, especially for investors who want to make short to medium-term investments, the first choice should be large-scale ETFs. Otherwise, you may encounter situations where you cannot buy when you want to, and it takes a long time to sell when you want to. Large-scale ETFs can also better cope with the impact of large fund redemptions.

Finally, it is important to remind that although the CSI 1000, as a broad-based index selected by the GJD, is suitable for inclusion in the core position, it should not be overly concentrated. It is still necessary to reasonably allocate some other styles of ETFs with high dividends and bonuses to build a barbell portfolio to cope with uncertain style switching.