Event:
On May 20, the one-year LPR was flat at 3.7%, and the five-year LPR was reduced by 15bp to 4.45%.
Comments:
The five-year LPR fell more than expected, boosting demand and stabilizing real estate, while easing the pressure on interest payment of stock debt. The five-year LPR fell by 15bp, a new high since the data were available. Since the reform of LPR system, LPR in one year and five years has shown the characteristics of asymmetric adjustment. LPR in one year has decreased by 55bp, while LPR in five years has decreased by 25bp; The five-year LPR fell by 15bp to 4.45%, second only to the 20bp decline of one-year LPR during the 20-year epidemic, while the one-year LPR remained unchanged, unchanged from 3.7% of the previous month. Unlike the previous asymmetric interest rate cut, it is closely related to the accelerated decline of real demand and the stabilization of real estate. At present, the physical demand is relatively low, which is not only impacted by the epidemic; The contraction of real demand began to accelerate at the end of last year and the beginning of this year, and the medium and long-term loans of enterprises and residents have fallen sharply. Previously, the lower limit of individual first home commercial loan interest rate has released a positive signal of stabilizing real estate, and the decline of LPR in five years has further reduced the cost of house purchase loans.
The reduction of LPR can stimulate the demand of entities in the short term and help alleviate the pressure of interest payment on the stock debt of entities and local governments. Under the loan interest rate anchored LPR mechanism, the five-year LPR reduction will directly reduce the financing cost of new medium and long-term loans for enterprises and residents and stimulate the demand of entities; The interest rate of stock floating rate loans will mostly follow the LPR adjustment within one year, so as to alleviate the interest payment pressure of stock debts such as enterprises, residents and local urban investment platforms
The reduction of LPR or the beginning of a new round of “acceleration” of steady growth, followed by financial, real estate and other measures
Lower LPR, or the beginning of a new round of steady growth “afterburner”. Under the prominent phenomenon of capital retention in the financial system, the reduction of LPR in five years will directly lead to the decline of financing costs, or help to speed up capital dredging; The decline of 15bp is not the “end point” of cost reduction, and there is still room for further decline in LPR. At the same time, monetary policy will increase the use of structural tools and increase financing support for key areas and redundant links; The cooperation between the central bank and CDB to use similar pls tools to support the construction of major projects such as transportation and energy is also a possible alternative.
Not only monetary policy, but also the signals of stability maintenance and overweight such as finance and local real estate are also very clear, but they are not “following the old road”. To stabilize growth, only the “water” is not enough, but also the “face”. We need to speed up the allocation and use of financial funds and the resumption of projects. The measures to actively release demand are already on the way, and the retention of tax rebates and other measures to ensure market players and employment are also being stepped up. The lower limit of 5-year LPR and the first house interest rate has opened up the adjustment space of “implementing policies according to the city”, but the logic of real estate supply and demand in different cities is different, which determines that the interpretation of stable real estate may be different from the traditional cycle.
Reiterate the view that the worst stage of the economy may have passed, and the pace and elasticity of subsequent repair still need to be closely tracked. The greatest interference of the epidemic on economic activities and market expectations may be concentrated in April. With the gradual weakening of the impact of the epidemic, economic activities have begun to repair gradually, and production repair may be faster than investment and consumption. Follow up attention will be paid to the sustained “acceleration” of steady growth and the effect of boosting economic demand (for details, see “LPR reduction, or just start”, “steady growth, what are the key points of the project?).
Risk tip: the policy effect is not as expected.
