LPR cut interest rates as scheduled
On January 20, the central bank announced the January LPR quotation, and the one-year LPR was reported at 3.7%, down 10 BP; Varieties with a maturity of more than 5 years were reported to be 4.6%, down 5 BP. This is also the simultaneous down-regulation of LPR reproduction of the two varieties after 21 months.
\u3000\u30001. The decline of LPR interest rate is in line with the historical law. Since the LPR reform in August 2019 until the current cut, the LPR has experienced a total of five cuts, including two after the RRR reduction and three after the MLF interest rate reduction. Therefore, after the central bank cut the MLF interest rate on January 17, the LPR reduction is in line with expectations. In terms of installment limit, the LPR after three MLF interest rate reductions was reduced. Only in November 2019, the LPR for one-year period and more than five-year period was reduced by five BPS simultaneously. In February and April 2020, the reduction range of LPR over 5 years is half that of 1 year. Overall, the asymmetric interest rate cut of this LPR also conforms to the historical law.
\u3000\u30002. We believe that the reasons why LPR over 5 years has not been reduced by 10 BPS simultaneously: 1) according to the interpretation of the central bank, LPR is formed by the quotation bank according to the market-oriented quotation of the actual loan interest rate for the best customers, and capital cost, market supply and demand, risk premium and other factors will affect it. LPR quotation 1-year LPR and 1-year MLF are more matched in terms of term, and it is easier to understand the synchronous reduction, while the proportion of 1-year MLF in the bank’s liability side is relatively low, and LPR quotation itself is the bank’s market-oriented quotation. In order to maintain the net interest margin, A 10 bp cut in the 1-year MLF interest rate is not enough to prompt banks to simultaneously cut more than 5-year lpr10 bps. 2) Although the downward pressure on real estate investment is still large at present, the general direction of not speculation in real estate will not change. Therefore, LPR over 5 years will be reduced by 5 BP, releasing the signal of moderate relaxation rather than comprehensive relaxation of real estate.
\u3000\u30003. There is still room for monetary policy in the future. We still believe that this interest rate cut is not the end of this round of easing. Liu Guoqiang, vice governor of the central bank, said at a press conference on January 18 that “we should open the monetary policy toolbox wider, keep the total amount stable and avoid credit collapse”, which clearly defined the overall easing direction of monetary policy in 2022. With the Fed’s monetary policy tightening pace expected to advance, the first quarter is still an important window for China’s monetary policy, and it is still possible to reduce reserve requirements and interest rates. The plenary session of the State Council studied and deployed the economic work in the first quarter
On January 19, Premier Li Keqiang chaired the sixth plenary meeting of the State Council to discuss the government work report (Draft for comments) and study and deploy the economic work in the first quarter.
Li Keqiang said that at present, China’s economy is facing new downward pressure and uncertainties are increasing. We should strive to climb over the ridge, take stability as the priority, and put steady growth in a more prominent position. We will continue to do a good job in the “six stabilities” and “six guarantees”, deepen reform and opening up, strengthen cross cycle regulation, significantly strengthen the implementation of macro policies, launch more practical and hard measures conducive to boosting effective demand, strengthening supply guarantee and stabilizing market expectations, coordinate development and security, effectively prevent and resolve risks, strive to stabilize the macro-economic market and achieve more full employment, Keep the economy running within a reasonable range.
On the whole, the premier proposed to “significantly strengthen the implementation of macro policies”. He has a strong determination to stabilize growth, and the policy will still be strengthened. “Practical and hard moves to boost effective demand, strengthen supply guarantee and stabilize market expectations” respectively correspond to the triple pressure facing the economy. The direction of future policies will still focus on how to solve the triple pressure.
The financing balance decreased. On January 19, the financing balance of A-Shares was 1698.753 billion yuan, a month on month decrease of 3.249 billion yuan; The balance of margin trading was 1806.543 billion yuan, a month on month decrease of 5.677 billion yuan. The balance of financing minus securities lending was 1590.963 billion yuan, a month on month decrease of 821 million yuan.
Net inflow of land stock connect and Hong Kong stock connect. On January 20, the net purchase turnover of luchutong on that day was 12.576 billion yuan, including 66.880 billion yuan of purchase turnover and 54.303 billion yuan of sales turnover, with a cumulative net purchase turnover of 166.866 billion yuan. Hong Kong stock connect had a net purchase transaction of HK $6.544 billion on the same day, including a purchase transaction of HK $24.596 billion and a sale transaction of HK $18.051 billion, with a cumulative net purchase transaction of HK $2216939 billion.
Money market interest rates fluctuated. On January 20, Bank Of Shanghai Co.Ltd(601229) inter-bank offered rate Shibor overnight interest rate was 2.0350%, down 0.00bp, Shibor one week was 2.1130%, down 1.40bp. The weighted interest rate of pledged repo of deposit institutions was 2.0446% overnight, up 0.46bp and 2.1104% a week, down 0.31bp. The 10-year maturity yield of China national debt was 2.7271%, down 0.43bp.
U.S. stocks fell, while European stocks fluctuated. On January 20, the Dow Jones Industrial Average closed at 34715.39 points, down 0.89%; The S & P 500 index closed at 4482.73 points, down 1.10%; The NASDAQ index closed at 14154.02, down 1.30%. European stock market, French CAC index closed at 7194.16 points, up 0.30%; Germany’s DAX index closed at 15912.33 points, up 0.65%; The FTSE 100 index closed at 7585.01, down 0.06%. In the Asia Pacific market, the Nikkei index closed at 27772.93 points, up 1.11%; The Hang Seng Index closed at 24952.35, up 3.42%.
The dollar index rose. On January 20, the dollar index rose 0.20% to 95.7948. The euro fell 0.28% against the dollar to 1.1311. The dollar fell 0.19% against the yen to 114.1050. Sterling fell 0.10% against the dollar to 1.3600. The spot exchange rate of RMB against the US dollar closed at 6.3421, up 0.16%. The spot exchange rate of offshore RMB against the US dollar closed at 6.3478, up 0.05%. The central parity rate of RMB against the US dollar closed at 6.3485, up 0.22%.
Gold fell, crude oil fell and copper rose. On January 20, Comex gold futures fell 0.05% to close at US $1839.80/oz. WTI crude oil futures fell 0.65% to close at US $84.48/barrel. Brent crude oil futures fell 0.27% to close at US $87.48/barrel. COMEX copper futures rose 1.85% to close at US $4.5325/lb. LME copper three-month futures rose 2.22% to close at US $10039 / ton.
