More than five-year LPR down steady growth policy force
On May 20, the central bank announced the LPR in May, and the one-year LPR was 3.7%, which was the same as that in the previous period; The LPR over 5 years was 4.45%, down 15 BP compared with the previous period. This is the largest decline since the reform in August 2019, and for the first time, the LPR for one-year period remains unchanged and the LPR for more than five years is reduced. The past five asymmetric interest rate cuts have led to the expansion of the 5-year and 1-year LPR interest margin from 0.6% to 0.9%, and the interest margin has narrowed to 0.75% after this adjustment.
Previously, on April 25, the central bank lowered the RMB deposit reserve by 0.25 percentage points, the central bank paid 800 billion yuan in profits (equivalent to a 0.4 percentage point reduction in reserve requirements) and the upper limit of deposit interest rate by 10 bp. The market generally expects that LPR will be lowered to a certain extent in May. Finally, it exceeded the market expectation. We believe that the main reasons behind it: (1) as the downward pressure on the real estate is still large, reducing the LPR interest rate over 5 years will play a more positive role in stabilizing the confidence of the real estate market; (2) The one-year LPR mainly anchors the MLF interest rate of the same period. The central bank did not reduce the MLF interest rate when continuing the MLF in that month. In addition, the tightening of monetary policy of the Federal Reserve and the inflationary pressure imported from overseas have compressed China’s monetary policy space to a certain extent; (3) The adjustment of the upper limit of deposit interest rate mainly led to the reduction of the bank’s deposit interest rate for more than one year by 10 bp, which mainly reduced the bank’s long-term liabilities from the perspective of term matching.
Since the LPR interest rate over 5 years is linked to the mortgage interest rate, the mortgage interest rate is expected to be lowered to reduce the pressure on Residents’ mortgage interest. Since the beginning of the year, the real estate policies such as purchase and loan restrictions in many places across the country have begun to loosen to a certain extent, but the downward trend of real estate investment and sales has not stopped. In April, the medium and long-term loans of the residential sector even appeared the phenomenon of deleveraging, and the market’s expectation and confidence in real estate are still insufficient. Previously, on May 15, the central bank adjusted the differentiated housing credit policy, and cities where the loan interest rate of the first house has hit the lower limit have opened 20 BP downward space. Combined with the two adjustments, the loan interest rate of the first house in some cities may be reduced to 4.25%. In addition to reducing the debt pressure for home buyers, it will boost market confidence and promote the long-term benign development of the real estate market.
Generally speaking, under the complex and uncertain environment of China’s economic development this year, the LPR reduction will release policy dividends, the policy bottom will be more consolidated, and the measures to stabilize growth will continue to increase. The economic bottom and market bottom will gradually approach, stabilizing market confidence. It is expected that monetary policies will increase support for the real economy in the future, and we can continue to pay attention to investment opportunities in the direction of stable growth.
Increase in financing balance. On May 19, the balance of A-share financing was 1446728 billion yuan, an increase of 311 million yuan month on month; The balance of margin trading was 1526092 billion yuan, a decrease of 1.436 billion yuan month on month. The balance of financing minus securities lending was 1367364 billion yuan, an increase of 2.059 billion yuan month on month.
Net inflow of land stock connect and Hong Kong stock connect. On May 20, luchutong bought a net 14.236 billion yuan on the same day, including 53.586 billion yuan of purchase and 39.350 billion yuan of sale, with a cumulative net purchase of 162083 billion yuan. On the same day, Hong Kong stocks bought a net of HK $222 million, including a purchase transaction of HK $14.457 billion and a sale transaction of HK $14.235 billion, with a cumulative net purchase transaction of HK $2329808 billion.
Money market interest rates fell. On May 20, the weighted interest rate of pledged repo of deposit institutions was 1.3209% overnight, down 7.43bp and 1.5839% a week, down 0.09bp. The 10-year yield to maturity of China national debt was 2.7900%, up 1.26bp.
US stocks were mixed, while European stocks rose. On May 20, the Dow Jones Industrial Average closed at 3126190 points, up 0.03%; The S & P 500 index closed at 390136 points, up 0.01%; The NASDAQ index closed at 1135462, down 0.30%. European stock markets, French CAC index closed at 628524 points, up 0.20%; Germany’s DAX index closed at 1398191 points, up 0.72%; The FTSE 100 index closed at 738998, up 1.19%. In the Asia Pacific market, the Nikkei index closed at 2631934 points, down 2.53%; The Hang Seng Index closed at 2071724, up 2.96%.
The dollar index rose. On May 20, the dollar index rose 0.1400 to 1028934. The spot exchange rate of RMB against the US dollar closed at 6.6740, appreciating 938 BP. The spot exchange rate of offshore RMB against the US dollar closed at 6.7287, up 286 BP. The central parity rate of RMB against the US dollar closed at 6.7487, up 37 BP. The euro fell 0.20% against the dollar to 1.0588. The dollar rose 0.09% against the yen to 1277980. The pound rose 0.16 per cent against the dollar to 1.2470.
Gold rose, crude oil rose and Lun copper rose. On May 20, Comex gold futures rose 0.21% to close at US $184510/oz. WTI crude oil futures rose 0.42% to close at US $110.35/barrel. Brent crude oil futures rose 0.78% to close at US $112.91/barrel. LME copper three-month futures rose 0.06% to close at $9421 / ton.
