matter:
On the afternoon of December 3, when meeting with the president of the International Monetary Fund, the prime minister pointed out that “policies should be formulated around the needs of market players, a variety of monetary tools should be used to reduce reserve requirements in due time”.
Ping An View:
1. Why do you mention “timely RRR reduction”? First, the economic recovery brought about by the relaxation of supply constraints is not stable, and the structural problem of economic growth is still prominent. Second, cooperate to prevent and resolve financial risks. On December 3, Evergrande officially defaulted on its debt and announced the start of overseas debt restructuring. When some enterprise risks are cleared, it is necessary to loose monetary policy to hedge potential financial risks.
2. Is monetary easing constrained? First, since November, the prices of black commodities and crude oil industry chain have been adjusted, the high point of PPI inflation has been realized, and the space for monetary easing has been gradually opened. Second, by releasing the potential of the RMB exchange rate to adjust the internal and external balance, China’s monetary policy has “self dominated” adjustment space.
3. How to implement the “timely RRR reduction”? Considering the high level of this meeting, the upcoming renewal window of MLF in December and the early time of the Spring Festival in 2022, the standard may be lowered or launched quickly. In terms of the way of RRR reduction, at present, the central bank’s ability to guide the flow of loan funds is strengthened, and big banks play a “leading role” in the field of Inclusive Finance. We prefer that the central bank is more likely to reduce RRR in an all-round way.
4. Can we continue to play? From the perspective of stabilizing macro leverage and preventing systemic risks, it is necessary to increase the easing of follow-up monetary policy. However, the overall interest rate cut is strong, and we need to wait for the signal of increasing downward pressure on the economy.
5. How does the capital market behave? For the bond market, the impact of this RRR reduction may be far less than the RRR reduction in July this year. In the past three months, the market has repeatedly played games around the RRR reduction expectation for many times. It is expected that the information on the implementation of RRR reduction will be digested by the market soon. The focus of the follow-up game may be the effect of “wide credit” after the RRR reduction, and whether the “wide monetary” policy can continue to be deduced, but there are still opportunities in the process of the central downward movement of medium and long-term interest rate level. The “spring agitation” market in the stock market at the end of the year and the beginning of the year may be ahead.
The prime minister’s re mention of “timely RRR reduction” is mainly based on the problem that China’s economic aggregate is not stable and structural weaknesses are still prominent; Under the formal default of Evergrande, in order to prevent and resolve financial risks, it is also necessary to loosen monetary policy cooperatively. In terms of the constraints of monetary easing, PPI inflation inflection point is approaching, the trend of RMB exchange rate is strong, and there is still room for monetary policy easing. The “timely RRR reduction” may be implemented more quickly, while the central bank’s ability to guide the flow of loan funds is strengthened. Big banks play a “leading role” in the field of Inclusive Finance, and the probability will be introduced in the form of comprehensive RRR reduction. In the follow-up, it is necessary to increase the easing of monetary policy, but the overall interest rate cut is strong, and we still need to wait for the signal of increasing downward pressure on the economy.
Risk tip: the covid-19 epidemic worsened, regulatory policies tightened more than expected, and the Federal Reserve tightened monetary policy quickly
