Original title: The RRR cut is better than expected, and it is good for the A-share market to resolve concerns about funds
Reporter Gao Sheng
News from our newspaper last Friday, the central bank suddenly announced a general reduction of the deposit reserve ratio by 0.5 percentage points from July 15th, releasing about 1 trillion yuan in long-term funds. After this reduction, the weighted average deposit reserve ratio of financial institutions was 8.9%. Boosted by the news of the overall RRR cut, the FTSE China A50 Index futures rose. Market analysis believes that the RRR cut will have a certain positive effect on the stock market, and it can dispel the market’s concerns about funds to a considerable extent, especially for funds-sensitive varieties such as banks and real estate, and commodities-related varieties. The positive effect will be more obvious.
Central Bank: The orientation of prudent monetary policy has not changed, and the RRR cut releases about 1 trillion yuan in long-term funds
The central bank stated that the People’s Bank of China will continue to implement normal monetary policies when responding to the epidemic in 2020, and the intensity has gradually become normal after May, and the first half of this year has basically returned to the normal state before the epidemic. The RRR cut is a routine operation after the monetary policy returns to normal. A part of the funds released will be used by financial institutions to return the maturing medium-term loan facility (MLF), and part of the funds will be used by financial institutions to make up for taxes in mid-to-late July. The liquidity gap caused by the peak period will increase the proportion of long-term funds of financial institutions, and the total liquidity of the banking system will remain basically stable. At present, my country’s economy is stable and improving. The People’s Bank of China insists on the stability and effectiveness of monetary policy, adheres to normal monetary policy, and does not engage in flooding.
The purpose of this RRR cut is to optimize the capital structure of financial institutions, improve financial service capabilities, and better support the real economy. First, while maintaining reasonable and abundant liquidity, the financial institutions should strengthen their capital allocation capabilities to create a suitable monetary and financial environment for high-quality development and supply-side structural reforms. The second is to adjust the financing structure of the central bank, effectively increase the long-term stable funding sources for financial institutions to support the real economy, and guide financial institutions to actively use the RRR cut funds to increase support for small and micro enterprises. The third is that the RRR cut has reduced the capital cost of financial institutions by about 13 billion yuan per year, and the transmission of financial institutions can promote the reduction of social comprehensive financing costs.
The RRR cut is a comprehensive reduction. Except for some county-level legal person financial institutions that have implemented a 5% deposit reserve ratio, the deposit reserve ratio for other financial institutions is generally reduced by 0.5 percentage points, and the RRR cut releases about 1 trillion yuan in long-term funds. . The main reason for not lowering the deposit reserve ratio of some financial institutions is that the 5% deposit reserve ratio is currently the lowest among financial institutions. Maintaining this low level is conducive to financial institutions’ support for the real economy and their own steady operation.
Funds: RRR cut to dispel market concerns about funding
Hongta Securities Li Qilin believes that the reason for the RRR cut rather than the targeted RRR cut is that in addition to targeted support for small and micro enterprises, there are also considerations for hedging exports and stabilizing aggregate demand; reducing the cost of bank liabilities is a very clear policy direction. In addition, due to the consideration of long-term economic transformation needs, the governance of hidden debts and the high pressure of real estate regulation will continue for a long time. Li Qilin predicts that the future will be a combination of “structural tight credit + wide currency”, which is beneficial to the bond market.
China Merchants Fund believes that after the RRR cut is implemented, it may benefit the bond market. The bond market yields are likely to fluctuate downwards. The downward momentum of interest rate bonds may be better than credit bonds. At the same time, the maturity spread may narrow, but considering the current bond market The yields of all varieties are basically at historically low levels, and there is limited room for further downside. The extent of the bond market remains to be seen.
ABCA pointed out that before the RRR cut, investment institutions were generally worried that factors such as the issuance of local government bonds in the second half of the year and the reduction of the scale of QE by the Federal Reserve would have an impact on the domestic liquidity environment. This operation released a signal of loose monetary policy and dispelled market concerns about funding.
Jiang Yong, fund manager of Haifu’s investment department, believes that this will affect market expectations for liquidity to a certain extent, and the recent 10-year treasury bond yield has also seen more obvious changes. Next, we must pay close attention to changes in the US monetary policy. Judging from the current improvement in US non-agricultural data, it is expected that the Fed will release a tightening signal in the third quarter, or it will have a certain impact on the global financial market.
Wei Fengling, a strategist at Pengyang Fund, believes that in the context of the current economic growth momentum, inflation risks still remaining, the demand for stabilizing the macro leverage ratio, and emerging markets and the Fed’s marginal tightening signs, there are signs of a RRR cut. Exceeds market expectations, but is in the same line as the previous policy demands.
Wu Youhui, general manager of the macro strategy department of GF Fund, believes that the current operating situation of A-shares is copying the development path of the US stocks in the past ten years, that is, the necessity of timing is decreasing, but the differentiation of the structure is increasing significantly. He summarized his views in three sentences: First, structure is more important than timing, and there is a high probability that there will be no systemic risks in the market in the second half of the year; second, grasp the structural market in a volatile market, and use high economic growth to counter estimates. Value contraction pressure; third, the industry is better in technology than consumption, and most optimistic about high-end manufacturing. In terms of style, the growth of small and medium-sized caps is better than that of large caps.