On April 15, the people's Bank of China launched a 150 billion yuan medium-term lending facility (MLF) operation, and the bid winning interest rate remained unchanged at 2.85%. On the same day, the central bank announced that the reserve requirement would be reduced by 25bp. Our comments are as follows:
I. MLF stands still, the reduction rate is lower than the usual, and the policy is still in the power accumulation period.
With the fermentation of the epidemic in Shanghai and other places in March, the impact of the epidemic on the economy is intensifying. Especially after the meeting of the financial stability Council on March 16, market participants had high expectations for the strength of monetary policy. The two recent executive meetings of the State Council have made clear the direction of monetary policy in the next step: 1. Reduce the cost of commercial banks, guide the decline of LPR and promote commercial banks to make profits to the real economy through the reduction of reserve requirements and other tools; 2. Through the use of structural monetary policy tools, the scale of new credit will be directly increased.
In this context, the market is looking forward to today's monetary policy operation of the central bank. The policy decisions of keeping MLF interest rate unchanged and reducing reserve requirement by 0.25% are lower than market expectations to some extent, but we think it is in line with the current macro environment. At present, the steady growth policy is still in the stage of power accumulation. The power may need to be released after the Chinese epidemic is further clarified and the external constraints such as the Federal Reserve's interest rate hike and table contraction are clearer.
II. The deposit interest rate self-discipline mechanism is expected to continue to release dividends, and it is possible to reduce LPR alone.
Recently, the people's Bank of China has stressed the need to stabilize the cost of bank liabilities and optimize the self-discipline upper limit of deposit interest rate, which can be used as a policy tool. Last year, the people's Bank of China guided the reform of market interest rate pricing self-discipline mechanism and changed the self-discipline upper limit of deposit interest rate from the floating multiple of deposit benchmark interest rate to plus point. After the reform, the deposit cost of small and medium-sized banks has basically decreased. Assuming that the self regulatory upper limit of deposit interest rate for small and medium-sized banks is lowered by 10bp, on the whole, its driving degree for the downward debt cost of small and medium-sized banks is similar to that of last year. Combined with the cost saved by the RRR reduction operation, we believe that guiding the LPR interest rate to be reduced alone will become one of the monetary policy options of the central bank.
III. by the way, we also talk about our understanding of the financial data conference in the first quarter.
The "high total amount and poor structure" of credit data in the first quarter is the consensus of some market participants. According to the interpretation of the central bank's press conference, it can be seen that the medium and long-term loans in manufacturing, industry and export related industries are growing rapidly, which means that the sectors that drag down the medium and long-term loans of enterprises are mainly the construction industry, real estate development, agriculture and service industry, and China Africa infrastructure. In addition, the central bank provided details of the newly established scientific and technological innovation refinancing and inclusive pension refinancing tools. At present, the total scale of the two is set to be 240 billion yuan, superimposed with the clearly increased amount of refinancing for small agricultural support and the carbon emission reduction support tools that are used more than expected. The credit increment brought by structural monetary policy tools is expected to reach 800 billion yuan. On the whole, there is reason to remain optimistic about credit, but before the end of the epidemic, it may still be dominated by structural instruments.
IV. as for a shares, we insist that the end of the policy is now, and the economic end is expected from May to June, but the market end may have to wait until the end of the impact of the Fed's table contraction; In the short term, the cost performance of bonds is slightly higher.
Risk warning: changes in economic fundamentals exceed expectations; Monetary policy exceeded expectations.
