The central bank decided to cut the RMB deposit reserve ratio of large commercial banks, joint-stock commercial banks, city commercial banks, non-county rural commercial banks, and foreign-funded banks by 1 percentage point from April 25, 2018; on the same day, the banks mentioned above will each In the "first-in-first-out" order, the funds released by the RRR cut will be used to repay the medium-term borrowing facility (MLF) borrowed by the central bank. The central bank said that first, it can increase long-term funding, and the cost of bank funds will be reduced. The replacement of MLF has reduced the cost of interest paid by commercial banks, which will help reduce corporate financing costs. The second is to release 400 billion yuan in incremental funds, which increased the low-cost funding sources for small and micro enterprise loans.
Commentary by Wang Jun, chief strategist of China Chuang Securities: 1. This year's monetary conditions and interest rate environment are more optimistic than last year, and the preliminary views are being verified; 2. Best efforts are made to avoid internal and external pressure resonances. The domestic policy is focused on currency; 3. No Concerned about exchange rate fluctuations again, the renminbi has strong currency values due to arbitrage, and monetary policy has loose room to open; 4. It is a safety cushion for the next financial deleverage and risk prevention. 5. The impact on the market, rebalancing of stock debt, and rebalancing of blue-chip growth.
The People's Bank of China announced on April 17 that starting from April 25, 2018, the renminbi deposit reserve ratio of large-scale commercial banks, joint-stock commercial banks, city commercial banks, non-county rural commercial banks and foreign banks was cut by 1 percentage point. In this regard, Yan Yuejin, research director of the Yikui Research Center think tank, commented as follows:
The central bank's policy of lowering the target is obviously different from many market expectations, which fully proves the special nature of the current macroeconomic and industrial economic development. The logic lies in the fact that the current risk of insufficient liquidity begins to increase. From the perspective of the sound operation of the banking system and the reduction of the cost of the industrial economy, there is a need for similar reductions in practice. Similar practice is naturally under the condition of continuous tightening of the current funding situation, which belongs to the effect of sending the spring breeze.
It should be said that the direct effect of lowering the standard is that the available funds of the bank will increase. This will directly increase the liquidity and reduce the cost of capital. Therefore, for all types of banks, the degree of self-reliance in loans and other areas will increase in the future. At the same time, support for related industries will increase.
From the perspective of the real estate market, we are now beginning to face the risk of tightening some funds, and in particular bank loans have indeed tightened. Therefore, similar policies can obviously ease the risk of lack of real estate funds. Taking into account the recent National Bureau of Statistics data, in itself is slightly pessimistic, but this time the central bank to cut the quasi-policy, help to achieve a more relaxed mortgage environment.
For such an environment, it is also necessary to see that the main reason is to cooperate with the structural reform of the supply side. “Rural housing is not fried” is still the red line. This point will not be broken, but for some developers, it will Can obtain lower-cost funds, which is conducive to the rise of real estate development investment and other data this year. For homebuyers, it may be that the relatively stringent lending policies of the banks will be improved. This has a more positive effect. However, it must be noted that ample funding is to create a fair environment, rather than encouraging all kinds of illegal funds to enter the property market. This is essentially different from the loose monetary environment in the past.
Dr. Zhang Ming, the chief economist of Ping An, said to the seemingly “neutral” descending event that, as I pointed out earlier, the Chinese government may take steps to hedging the adverse effects of the trade war on economic growth. The recent high-frequency data show that the domestic growth momentum is down. The superposition of attention to the adverse impact of trade wars has increased the probability of the possible tightening of financial supervision policies in the second quarter, and the timing of the central bank’s liquidity operations has eased (before we judge It will happen in the third quarter). The specific impact of the central bank's move remains to be seen, but the direct impact is a favorable bond market, which helps stabilize the stock market and the macro economy.
Guo Li Securities Li Lifeng said that with the highly uncertain external demand this year, monetary policy should have shifted this year, shifting from a neutral bias to a modest expansion of domestic demand. The "Central Bank of China has implemented targeted reductions in deposit reserve ratios for some banks" disclosed today is confirming our view that monetary policy has been fine-tuned.
The People's Bank of China lowered the deposit reserve ratio of some financial institutions by 1 percentage point. Li Dazhao, chief economist of British University Securities, said that the central bank's operation of partial financial institutions and the replacement of medium-term borrowing facilities (MLF) operations aimed at increasing long-term capital supply, reducing corporate financing costs, and releasing 400 billion yuan in incremental funds, increasing The source of low-cost funds for small and micro enterprise loans to solve the financing problems of financing difficulties for small and micro enterprises, has a positive effect on stabilizing economic growth, and has a very positive effect on the stability of the stock market. It is a major positive news.
The central bank decided to cut the reserve requirement ratio by one percentage point from April 25th, 18th, to release liquidity to the market. The central bank’s move is very timely. On the one hand, we can release 400 billion yuan of incremental funds to the market through the reduction of subsidies, ease the pressure on the current shortage of funds on the market, and promote economic growth. On the other hand, under the current background of Sino-US trade friction, the RRR cut can increase long-term funding, and the bank’s capital cost will be reduced. Replacement of MLF will reduce the cost of commercial bank interest payments, which will help reduce corporate financing costs. This is no doubt greatly boosted investor confidence.
I have always believed that trade frictions between China and the United States will eventually be resolved through negotiations, but there will still be some partial frictions in individual areas, which will have a certain impact on some related listed companies. Today, the U.S. Department of Commerce announced the restrictions on the export of ZTE. This has also triggered market concerns and there has been a substantial adjustment in the broader market. And the central bank can significantly boost investors' confidence in the market after they cut their benchmarks.
Today, the National Development and Reform Commission also released news that the auto industry will implement a transitional period to cancel investment restrictions on foreign investment and further express the sincerity of China's opening up. At the end of last year, we gradually opened up the financial market, that is, to increase the proportion of foreign investment in domestic financial institutions, and now we have opened up the shareholding ratio in the auto industry. At the same time, in the aspect of intellectual property protection, China will also adopt legislation to protect intellectual property rights. This series of measures shows that China’s determination to expand openness is conducive to the promotion of an agreement in the Sino-U.S. trade negotiations. It is also conducive to winning a better trading environment for China.
This morning, the Bureau of Statistics released economic data for the first quarter. The economic growth rate in the first quarter was 6.8%. Basically in line with expectations. The economic structural adjustment has achieved remarkable results. According to statistics, the contribution of consumption to GDP in the first quarter has reached 77.8%, far exceeding the contribution of investment and exports, and the dependence of China’s economic growth on exports has further weakened. At the same time, the tertiary industry (service industry) contributes 61.6% of GDP, and far exceeds the primary industry and the secondary industry. This shows that after years of reform and transformation efforts, the overall economic situation in China has been improving steadily, and the quality of economic growth has increased substantially. This is the basis for the economic side of the strong stock market.
The recent adjustment of the A-share market was mainly affected by the international situation and Sino-US trade friction. The economic fundamentals have not changed and many high-quality stocks have been killed. Today, the central bank lowered the deposit reserve ratio to boost market confidence. The market outlook is expected to start a rebound and gradually repair the previous decline.
For example, Guan Qingyou, dean of the Institute of Finance and chief economist, stated on Weibo on the 17th that the current quotation will be a repeat of 2014? This time, the degree of subtraction is very strong. In the first quarter, although the economy performed well, high-frequency data showed signs of obvious downside. The tight funding side has made it more difficult for SMEs to raise funds. It is necessary to maintain moderate liquidity; the trade friction between China and the United States may gradually appear, and the RRR reduction helps. Hedging risks; monetary policy this year may be marginally loose, the pace of supervision may also be slowing, and downward pressure on asset prices eased.
The central bank's targeted quasi-inclination corresponds to the impact on A-shares. Dongwu Strategy believes that the end result is further strengthening of growth logic. There are two main reasons: First, the policy-oriented perspective. This time, the main objective of the downgrade is to increase support for small and micro enterprises. First, increase long-term funding, which will help reduce corporate financing costs; second, release 400 billion yuan in incremental funds, and increase the low-cost funds for small and micro enterprise loans. source. In addition, the PBOC will also require relevant financial institutions to use the new funds mainly for the loans of small and micro enterprises, appropriately reduce the financing costs of small and micro enterprises, and improve the financial services to small and micro enterprises. The above requirements will be included in macro-prudential considerations. Assessment (MPA) assessment. Second, the marginal improvement in liquidity will help improve the valuation of small and medium-sized companies. The RRR cut means that the relatively loose liquidity this year is still expected to continue, and liquidity easing is the core supporting logic for the valuation of small and medium-sized companies.
Lian Ping said that despite wide coverage, it is still a directional reduction: the current RRR basically covers major deposit-taking financial institutions, but it explicitly requires the use of funds to replace unexpired MLF, and requires excess funds for small and micro enterprises. Credit, and strengthen the assessment in the MPA, so it is targeted to lower standards, targeted support for small and micro enterprises. MLF funds have been replaced with lower-cost excess reserves, and the cost of bank liabilities has been reduced, which will help improve the stability of liabilities and optimize the liquidity structure. In particular, the long-term stability funds will be supplemented with MPA assessment requirements, which are expected to drive certain The scale of incremental funds is invested in small and micro enterprises, reducing their financing costs.
CITIC's fixed-income analysts expect that the central bank's targeted downward adjustment will release 1.3 trillion yuan in liquidity. The current quotation is for the expiration of the hedged MLF. Estimated at the end of the first quarter of 2018, on the day of the operation, the MLF will be repaid by about 900 billion yuan, while the incremental funds will be released at about 400 billion yuan.
Reasons for lowering the budget: Lowering the cost of funds, lowering the deposit reserve ratio of some financial institutions to facilitate the replacement of medium-term borrowing facilities facilitates the reduction in the cost of interest payments for commercial banks, which will help reduce the cost of financing for enterprises; release of collaterals, and lower the rate of replacement of certain financial institutions. The medium-term borrowing facility facilitates the release of the interest rate bonds and high-grade credit bonds pledged by the borrowing bank to increase inter-bank liquidity levels; it facilitates the expansion of the bank’s debt side: the pressure on the current bank’s off-balance sheet funds is still relatively large, but the return of funds to the table The process is subject to friction, making the growth rate of M1, M2 and RMB deposits as a whole slower, while the RRR cut will increase the money multiplier, which is conducive to the expansion of the bank’s debt side.
Impact on bond market: Decreasing the deposit reserve will narrow the spread of the time limit, and the long-term interest rate will have downward pressure, and the yield on the future 10-year government bond will fall to the range of 3.4% to 3.6%.
Regarding the impact on the stock market: The RRR cut will help hedge against the recent overseas shocks, stabilize market expectations, and in particular support the financial industry, which will benefit the banking system's liabilities.
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