Key investment points:
Drop the standard and land. After the National People's Congress on April 13 mentioned the timely use of reserve requirement reduction and other monetary policy tools, the central bank issued an announcement on April 15 and decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the deposit reserve ratio of 5%). In order to increase the support for small and micro enterprises and "agriculture, rural areas and farmers", for urban commercial banks without inter provincial operation and agricultural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point will be reduced on the basis of reducing the deposit reserve ratio by 0.25 percentage point. The RRR reduction released a total of about 530 billion yuan of long-term funds. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.
Fully reduce the reserve requirement by 25bp. Compared with the previous 50bp RRR reduction, it is slightly lower than expected, but it may also leave room for follow-up policies. On the one hand, since April, dr001 and dr007 interest rates have remained low, and liquidity is not too tight. On the other hand, on January 18, Liu Guoqiang, vice governor of the central bank, said at the press conference of the state information office that the level of the deposit reserve ratio is not high compared with other developing economies or our historical deposit reserve ratio (at this time, it is 8.4%), and the space for further adjustment is smaller. However, from another perspective, the space has become smaller, but there is still a certain space, which can be used according to the economic and financial operation and the needs of macro-control.
Additional directional RRR 25bp. In addition to the overall reduction of 25 BPs, an additional targeted reduction of 25 BPS for urban commercial banks without inter provincial operation and rural commercial banks with a deposit reserve rate of more than 5% is equivalent to the implementation of accurate financial support for small, medium-sized and micro enterprises with great impact of the epidemic. Combined with the previously announced new scientific and technological innovation and special refinancing for inclusive pension, monetary policy continues to play a dual function in total amount and structure.
Easing is not over, and interest rate cuts are still possible. At present, the RRR reduction has been implemented. In combination with the profits previously handed over by the central bank and the self-discipline mechanism of market interest rate pricing, a meeting was held to encourage the reduction of the floating upper limit of deposit interest rate of small and medium-sized banks. On the whole, we believe that under the condition that the MLF interest rate was not reduced in April, there is still room for the reduction of 1-year LPR interest rate, and 5-year and above LPR may remain unchanged. On the other hand, it is expected that the RRR reduction will still be within the relevant tools of monetary policy according to the impact of the epidemic on China's economy and the changes in the overseas situation.
The central bank pays attention to inflation and internal and external balance. In terms of comprehensive consideration after the RRR reduction, the central bank mentioned that first, pay close attention to the changes in price trends and maintain the overall stability of prices. CPI rose significantly year-on-year in March. After the short-term factors leading to the poor supply chain caused by the epidemic subsided, CPI may maintain a moderate rise, while PPI is not fast in the short term due to the high upstream price. Second, pay close attention to the adjustment of monetary policy in major developed economies, taking into account internal and external balance. The Fed's interest rate increase and reduction has certain restrictions on China's loose space, but the overall impact is relatively controllable due to the fact that the real interest rate is still far from upside down and the increase in foreign exchange settlement demand caused by last year's high surplus.
Generally speaking, the RRR reduction is conducive to the improvement of risk appetite in the equity market and boost market confidence. After banks reduce the cost of liabilities, it is conducive to the decline of financing costs of the real economy and release economic vitality. For the bond market, easing is not over, but credit easing is also on the way, and the yield of 10-year Treasury bonds may remain low. In terms of recent signals, the "policy bottom" has been further confirmed, but we still need to pay attention to the impact of China's epidemic on the real economy in the short term.
