July 8th title: “Wang Han, etc.: The National Standing Committee will raise and lower the standard,interest rateMid- to long-term downturn or general trend”
Author Wang Han (Industrial SecuritiesManaging Director, Chief Economist) Duan Chao (Industrial SecuritiesSenior MacroeconomicsAnalyst) Sumomodai Lee (Industrial SecuritiesMacroeconomics researcher)
The executive meeting of the State Council held on July 7, 2021 decided to maintaincurrencyPolicy stability, enhancement of effectiveness, timely use of monetary policy tools such as RRR cuts, to further strengthen financial support for the real economy, especially small, medium and micro enterprises, and promote a stable and moderate reduction in comprehensive financing costs. We believe that this means that the probability of a RRR cut or a targeted RRR cut has risen sharply.
According to previous experience, there are often 1-2 weeks between the announcement of the national meeting and the implementation of the policy.For example, on May 6, 2020, the State Council emphasized support for multi-channel financing of small, medium and micro enterprises, and then announced on May 15 that small and medium deposit institutions will cut interest rates; on March 31, 2020, the State Council will further implement thebankThe directional reduction of the RRR was subsequently reduced on April 15. Exceptions also exist. For example, the National Regular Meeting on June 17, 2020 mentioned the comprehensive use of tools such as RRR cuts and refinancing. However, the economy has recovered rapidly since then and no RRR cut policies have been implemented.
interest rateMid- to long-term downturn may be the general trend. The State Council executive meeting’s emphasis on RRR cuts has somewhat exceeded market expectations, but from a mid-to-long-term perspective, as we emphasized in our spring and mid-term strategies for 2021, there are three reasons why interest rate bonds have continued to have allocation value since the second quarter: 1) At present, various entities in the society are under great pressure to pay interest rates. The downward movement of the medium and long-term interest rate center is the general trend; 2) With the gradual slowdown of real estate, infrastructure, and export growth, China’s economic growth may gradually return to the potential center in the second half of the year, and monetary policy Or maintain steady and loose; 3) Credit risks may be gradually released in the second half of the year. From the perspective of preventing large-scale credit incidents, monetary policy will also be “easy to loosen but difficult to tighten.”
In the long run, the market logic may continue to switch to mid- to long-term logic.As we have emphasized, in the second half of the year, China’s macro-economy will gradually move closer to the mid- and long-term center, with relatively ample liquidity, and overseas markets.MidlandThe long-term storage is still “overwhelmingly difficult to collect”, which means that the market may continue to switch to medium- and long-term logic. In terms of equity, long-term track assets are more optimistic; in terms of bonds, the pressure on stock debt may mean that a low interest rate environment is needed to maintain, and interest rate bonds are still in progress. Long-term configuration value.But recently the market hasMidlandThe expected “Price in” (the market digests the information and gives the corresponding price) is faster than the expected “price in” (the market digests the information). In the short term, we also need to be careful about the third quarter of the third quarter of foreign central banks and the release of credit risks.
(Source: Sino-Singapore Jingwei)
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