Who Will Benefit From The Second Fall In 16 Years? What Else Is There After That?

China new latitude and longitude client 16 September (Zhang Shunan) to support the development of the real economy and reduce the actual cost of social financing, the central bank decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points from today (16). This is the second time since January this year that the central bank has announced a comprehensive reduction.

"Comprehensive reduction and quasi directional reduction" double arrows

Two days after the National Convention was put forward, it was necessary to apply the policy tools such as universal reduction and directional reduction. In September 6th, the central bank announced that it would reduce the deposit reserve ratio of financial institutions by 0.5 percentage points in September 16, 2019 (excluding financial companies, financial leasing companies and auto financing companies). In addition, an additional 1 percentage point reduction in the deposit reserve ratio for urban commercial banks operating only in the provincial administrative region was implemented in two times in October 15th and November 15th, with a reduction of 0.5 percentage points each time.

The central bank official said that the release of the long-term funds will be about 900 billion yuan, of which the total release of funds is about 800 billion yuan, and the release of funds will be about 100 billion yuan. The official also said that the drop can effectively increase financial institutions to support the real economy of the source of funding, but also reduce the cost of bank funds every year about 15 billion yuan.

This is the third time that the central bank has lowered its quota in 2019, and it is also the second comprehensive reduction. In January this year, the central bank announced a comprehensive reduction of 1 percentage points. In May, the central bank decided to implement a low concessionary deposit reserve ratio for small and medium-sized banks focusing on the local and serving counties.

Societe Generale Bank chief economist Lu commissar analyzed that the reduction of the strength has 3 points beyond expectations: first, it did not mention that the MLF will not be renewed after the reduction of the benchmark, which means that the MLF that expires in September may still shrink; the two is to announce the full scale reduction and directional reduction, and the amount of funds released will reach 900 billion; three, although the quasi time point coincides with the September tax period, September is not a tax month. The impact of tax payment on liquidity is temporary.

Fu Lichun, director of Northeast Securities research, told the Sino Singapore Jingwei client that lowering the deposit reserve ratio and the interest rate LPR market reform will become the main tool for the central bank to regulate and control. In order to cope with the complex international environment and potential economic risks, it is expected that there will be room for future RR.

CITIC Securities Research Report believes that the direction of the drop in the choice of the province to operate the city commercial banks, both aimed at solving the problem of liquidity stratification, help to achieve accurate liquidity. In addition, the choice of the province's operation of the city commercial bank is also a positive guide to regional banks focus on the local, is expected to Zhengzhou, Qingdao, Xi'an, Suzhou bank is expected to enjoy the orientation policy.

How to affect the stock market, the real estate market and the bond market

On the stock market side, the Sino Singapore Jingwei client combing found that since 2018, 5 rounds of RRR have been implemented, and the first 4 reductions have come into effect. On the same day, the Shanghai Stock Exchange Index and Shenzhen Stock Exchange Index of A shares have been reported in green disk. The first round of RR in 2019 was completed two times. On the effective date, the Shanghai Composite Index and Shenzhen stock index were reported on the red disk.

Vanward Securities believes that at present, the market still has certain expectations for the subsequent MLF interest rate adjustment, adding multiple favorable factors such as favorable policies and liquidity environment. The improvement of A share market risk appetite is expected to continue. Ren Zeping, chief economist of Hengda Group, also believes that the general manager will benefit from the stock market. In terms of total volume, the liquidity will be reduced and the interest rate will be downwards. The strict control of capital flow into real estate will help the stock market rise.

In terms of property market, Yan Yuejin, director of the research center of E-House Research Center, analyzed the accuracy of the reduction, which is also a positive signal for the real estate industry.

He said that in the second half of this year, the overall judgement of the real estate market is mainly pessimistic, including the LPR policy. In fact, the final conclusion will be that the interest rate of mortgage will only rise and not fall. But this reduction indicates that the stability of the economy is more important than the past deleveraging, and the real estate industry itself will continue to play a stabilizing role in the economy.

Yan Yuejin also said that after lowering the standard, the bank's liquidity will be greatly supported, and at the same time, it will help to ease the follow-up bank lending policy. As a result of the implementation of the new LPR loan pricing mechanism in October, some cities have increased their base points, but relatively speaking, banks are more willing to lend actively, which is also good for the property market loans.

Zhongyuan Real Estate chief market analyst Zhang Dawei analysis, history, as long as the drop in the right direction, for real estate is certainly good, can alleviate the pressure of capital side. But in the current situation of tightening property market policy, the benefits are limited.

"The real estate loan will definitely relieve the financial pressure of the real estate enterprises. For the buyers, the real estate loan is still a high quality credit business for most banks. The purpose of the reduction is not to breathe for the property market, but it is hard to avoid. The property market will benefit and the market is expected to be stable. Zhang Dawei said.

For the bond market, Haitong Securities chief macroeconomic analyst Jiang Chao believes that restrained by the short end interest rate stability, nearly a month 10 year treasury bond interest rate at 3% resistance level is difficult to break through. The RR is conducive to driving the short end interest rate downward, thus opening up the long end interest rate downside space.

Soochow Securities said that on the whole, the central bank will be in line with the national consensus and will continue to maintain a relaxed attitude in the latter part of monetary policy. At the same time, we can see that monetary policy is still not flooding, and its focus is still on cost reduction and restructuring. Therefore, the four quarter is still optimistic about the bond market.

What else is there after the calibration?

Since 2018, the "interest rate double track" phenomenon is still obvious. The interest rate in the money market and bond market has been significantly downward. However, the average weighted average interest rate of the general loans of financial institutions is only slightly down, far from the "real reduction" of the real interest rate level.

In the unknowable time when the rate of reduction has been reached and whether the rate of interest reduction is passed through MLF in September, the market expects to judge the next step of monetary policy through every open market operation of the central bank. In the view of the financial futures, the Central Bank of China will still follow the Fed's interest rate cuts in September. In September, the US Federal Reserve cut interest rates by 25 basis points, with a small probability of 50 basis points. It is expected that the Central Bank of China will lower the MLF interest rate by 10 basis points, thereby driving down the LPR interest rate.

China Financial Futures said that the need for the central bank to cut interest rates is that the downward pressure on the real economy is quite large. Only by lowering the benchmark, it can not effectively stimulate bank lending and expansion of entity credit. Therefore, it is necessary to cooperate with both sides in order to improve the effectiveness of policies. Moreover, this may be the beginning of a relaxed cycle.

The deputy director of CITIC Securities Research Institute clearly indicated that in September 6th, the central bank announced that the combination of quasi reduction and quasi directional reduction exceeded expectations, but the market did not respond to the MLF after 9 days. Compared with the recent trend of interest rate reduction since 2018, the main reason for this market reaction is that it is worried about the follow-up policy. On the one hand, whether the probability of reducing interest rates will drop after a comprehensive reduction? On the other hand, if the MLF is not renewed after the drop, the actual easing effect may be limited.

Obviously, the reason why MLF does not renew in the short term is to avoid overlapping of short-term liquidity. But since July, liquidity gap still needs medium and long term liquidity supply. It is worth mentioning that MLF also has the function of pricing interest rates. If we reduce the "MLF" operation, it will be difficult to advance the interest rate marketization. At the same time, it is still difficult for the central bank to reduce the scale caused by the reduction of the central bank to promote the expansion of banks. To drive the expansion of banks, other regulatory policies and industrial policies are needed.

Wen Bin, principal research fellow of China Minsheng Bank, said that on the basis of RRP, there is still room and necessity to cut interest rates. The new LPR mechanism should be adopted to guide financial institutions to effectively reduce the financing cost of the real economy. He predicted that in September 20th, LPR's one-year offer rate would drop by 5 basis points to 4.2%.