On the evening of April 17, the People's Bank of China announced that it would cut the renminbi deposit reserve ratio of large commercial banks, joint-stock commercial banks, city commercial banks, non-county rural commercial banks, and foreign banks by 1 percentage point; on the same day, the above banks will each follow the first In the order of “returning first”, the funds released by the RRR are used to repay the medium-term loan facility (MLF) of the central bank it borrows. The central bank said that by estimating the data at the end of the first quarter of 2018, the MLF was repaid about 900 billion yuan on the day of operation, and the incremental funds were released by about 400 billion yuan. Most of the incremental funds were released to the city commercial banks and non-county agricultural commercial banks.
This article comes from the Yangtze River strategy, the original title "History, the market trend after the targeted RRR cut", the following is an excerpt.
What kind of impact will the directional RRR cut as a way for the central bank to release liquidity?
Since 2014, the central bank has conducted 8 RRR cuts, of which 3 are targeted RRR cuts (April 2014, June 2014 and June 2015), and 5 times are comprehensive RRR cuts (February 2015, 2015) April, September 2015, October 2015 and March 2016). (Partially, the directional reduction was carried out at the same time as the overall RRR cut. In this case, we classify it as a comprehensive RRR cut)
We separately calculated the performance of the Shanghai Composite Index and the Growth Enterprise Market Index on 5 trading days, 30 trading days and 90 trading days after the targeted RRR cut and full RRR cut since 2014: Overall, after the targeted RRR cut The market did not show obvious rules; after the overall RRR cut, the market rose in a short-term (5 trading days, 30 trading days) with a high probability, but in the long run there is no obvious law.
From the background of the past several targeted RRR cuts, the economy is generally facing certain downward pressures. When there are problems such as the risk of deflation and the decline in foreign exchange holdings, it is mainly a policy fine-tuning, and its impact strength and scope are less than the overall RRR cut.
The central bank can hedge the current market liquidity pressure by directional RRR, but at the same time it will not convey a more relaxed liquidity expectation to the market because it is not fully downgraded, and there is a three-month buffer period. Implementation will be in 2018.
On the whole, there is no absolute statistical law on the impact of RRR cuts, and it may affect risk preferences to a greater extent. In the current market environment, the short-term RRR reduction may form a risk appetite. However, in the medium term, we need to pay more attention to the implementation of the medium and long-term financial deleveraging policy.