In April, the central bank started "moderate" RRR reduction
The standard reduction will be implemented in April 2022. 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.
Minister of Finance Liu Kun: fiscal policy should be properly advanced and strive to stabilize the macro-economic Market
Liu Kun, Minister of finance, wrote in Qiushi magazine that in order to implement a positive fiscal policy this year, we should adhere to the principle of stability and seek progress while maintaining stability, properly advance the development of fiscal policy, make good use of the policy toolbox, make full progress in advance, introduce policies early, allocate funds early, achieve results early, and strive to stabilize the macro-economic market. Make good use of government bonds, expand effective investment, and support the construction of projects in transportation, energy, water conservancy and other fields. Local government special bonds should be appropriately used in a more centralized manner, and should be used in areas with sufficient project preparation, and the issuance and use of bonds should be accelerated.
Overall, the follow-up fiscal policy will continue to encourage and guide social capital to participate in the construction and operation of infrastructure and public service projects. We will improve the support policy system for education, old-age care, medical care, child care and housing, and promote the sustained recovery of consumption. We will implement policies such as subsidies for the purchase of new energy vehicles and exemption from vehicle purchase tax to promote the consumption of new energy vehicles. Support County commercial construction and expand rural consumption. We will promote the reform of government purchase of services in key areas to better meet the needs of public services. Help "steady growth" and stabilize the macro-economic market.
The financing balance decreased. On April 14, the balance of A-share financing was 1550205 billion yuan, a month on month decrease of 1.229 billion yuan; The balance of margin trading was 1639176 million yuan, an increase of 171 million yuan month on month. The balance of financing minus securities lending was 1461234 billion yuan, a month on month decrease of 2.629 billion yuan.
Net sales of funds to the north. On April 13, luchutong sold a net 498 million yuan on the same day, including 45.001 billion yuan of purchase and 45.499 billion yuan of sale, with a cumulative net purchase of 1610991 billion yuan. Hong Kong stock connect had a net purchase transaction of HK $940 million on the same day, including a purchase transaction of HK $12.401 billion and a sale transaction of HK $11.461 billion, with a cumulative net purchase transaction of HK $2287774 billion.
Money market interest rates fell. On April 15, the weighted interest rate of pledged repo of deposit institutions was 1.3444% overnight, down 16.52bp and 1.7295% a week, down 13.10bp. The 10-year maturity yield of China national debt was 2.7578%, down 0.78bp.
The Nikkei closed higher. On April 15, the Nikkei index closed at 2811039 points, up 0.25%. US stocks, European stocks and Hong Kong stocks were closed for Easter.
The dollar index rose. On April 15, the dollar index rose 0.0047 to 1003048. The spot exchange rate of RMB against the US dollar closed at 6.3712, depreciating by 8 bp. The spot exchange rate of offshore RMB against the US dollar closed at 6.3893, up 12 BP. The central parity rate of RMB against the US dollar closed at 6.3896, down 356 BP. The euro fell 0.14% against the dollar to 1.0829. The dollar rose 0.46% against the yen to 1258880. The pound fell 0.13% against the dollar to 1.3079.
Commodity futures were closed for Easter.
