The latest LPR (loan duration quotation interest rate) was released on May 20. The LPR over five years was 4.45%, down 15 basis points (BP) from the previous month, which exceeded market expectations. The 1-year LPR was 3.7%, unchanged from the previous value.
As for the performance of A-share market, as of the closing on May 20, the Shanghai index rose 1.6%, recovering 3100 points; Shenzhen Composite Index rose 1.82%; Gem index rose 1.69%; The Hong Kong stock market also rebounded significantly, with the Hang Seng Index up about 3% and the Hang Seng technology index up 4.7%.
Shen Chao, macro strategist of HSBC Jinxin fund, believes that for the stock market, the interest rate cut is conducive to stabilizing market sentiment, alleviating pessimistic expectations, and marginally helping to boost the confidence of the A-share market.
Zheshang Securities Co.Ltd(601878) Li Chao’s macro team predicts that there is still 15bp downside space for LPR over 5 years in the future. If the effect of short-term credit easing is not effectively shown, the central bank may continue to guide the downside of LPR over 5 years.
boost a stock market confidence
For the A-share market, Morgan Stanley Huaxin Fund expects that the downward trend of the interest rate center is expected to improve the valuation, and the policy shows that the attitude of supporting the economy will further improve the profit growth expectation, which will bring medium and long-term support to the market.
Xingshi investment believes that at present, A-Shares may have entered a more sensitive stage to benefit. Subsequently, with the promotion of broad credit and the stabilization of China’s economy, stock market confidence will continue to be in the recovery channel.
Shen Chao said that the most direct effect of reducing LPR is to reduce the mortgage cost of home buyers, which is conducive to the recovery of the real estate market and stabilize the overall economic market. Secondly, the decline of LPR is also expected to reduce the medium and long-term financing costs of enterprises and improve the profitability of enterprises.
Morgan Stanley Huaxin Fund mentioned that the follow-up also needs to continue to pay attention to the signals of marginal improvement in data such as real estate sales and social finance.
Li Zhan, chief economist of China Merchants Fund Research Department, also said that this reduction will greatly boost the market in the short term. In the follow-up, we will pay close attention to the implementation of relevant supporting policies and their impact on the market.
favorable real estate, finance and other sectors
“At present, it is rare that the housing loan interest rate is higher than the general loan interest rate”. Boshi fund analyzed that in the previous monetary policy, although it emphasized the decline of loan interest rate to guide the reduction of entity financing costs, it is relatively more focused on credit to infrastructure and manufacturing, while it is relatively restrained to real estate. Therefore, the decline of one-year LPR is more than five years, and the decline of housing loan interest rate is still slower than that of general loan interest rate.
According to the data of the Bureau of statistics, the sales area of commercial housing decreased by 20.9% year-on-year from January to April, and the financial data showed that the mortgage loan increased by nearly 400 billion yuan year-on-year in April. In the early stage, all localities gradually relaxed the real estate control policies under the framework of urban implementation policies. The central bank further reduced the cost of house purchase loans by reducing the five-year LPR, which once again released a positive policy signal, which helped stabilize real estate sales and was also an important direction of steady growth.
Sinolink Securities Co.Ltd(600109) believes that in combination with the continuous introduction of loose real estate regulation policies and optimistic about the real estate market throughout the year, it is expected that the first and second tier cities and Yangtze River Delta cities with good fundamentals will take the lead in stabilizing and recovering, and improve demand or the traction of this round of market recovery.
In terms of enterprises, Xingshi investment pointed out that although the local epidemic in April periodically interfered with the financing demand, from the data in March, the medium and long-term loans of enterprises have improved. The interest rate cut sent a clear signal of steady growth, boosted the business expectation and stimulated the medium and long-term loan demand of enterprises. It is expected that as the epidemic subsides and China’s logistics and economy recover, medium and long-term loans of enterprises will continue to improve.
In terms of residents, the five-year LPR is directly linked to the mortgage interest rate, superimposed with the central bank’s reduction of the lower limit of the mortgage interest rate in the early stage, which will help stimulate residents’ demand for house purchase and reduce the burden of residents’ departments. China’s real estate sales are expected to improve marginally. At the same time, the weakening of residents’ debt burden has increased consumption capacity in disguise and boosted residents’ consumption expectations.
For banks, the reduction of LPR will drag down the bank’s interest rate spread performance, Orient Securities Company Limited(600958) analysis, but since April, the central bank has reduced the bank’s debt end cost by reducing the reserve requirement and establishing a market-oriented adjustment mechanism of deposit interest rate. It is expected that the negative impact of LPR reduction on bank profits is limited.
Huatai Securities Co.Ltd(601688) analysis: due to the impact of mortgage loan repricing, the impact on the interest margin and profit growth of listed banks in 2023 is – 5.2bp / – 4.8pct.
In addition, the current valuation of the banking sector is at a relatively low level in recent ten years, and the data of Tonglian dadayes! It shows that as of May 20, the static Pb valuation level of the banking sector was only 0.59 times. Under the background of the steady growth policy, securities companies are generally optimistic about the opportunity of sector valuation repair.
