1. The pace of the overall RRR cut is faster than expected, highlighting the determination of the management. Prior to this, on December 3, Premier Li Keqiang of the State Council met with InternationalMonetary FundWhen organizing Georgieva, he said “continue to implement a soundcurrencyPolicies, maintain reasonable and sufficient liquidity, formulate policies based on the needs of market players, use multiple currency tools, timely reduce the RRR, increase support for the real economy, especially small, medium and micro enterprises, promote a stable and moderate reduction in comprehensive financing costs, and ensure the economy Smooth and healthy operation.” The central bank’s RRR cut is undoubtedly an important measure to implement the management statement, but the overall pace is faster than expected. From the past, after the release of the signal of the RRR cut, it often enters the actual landing in the next few weeks. But in the next few weeks. After the Premier of the State Council proposed a “timely RRR cut”, the central bank announced a comprehensive RRR cut only three days later. The pace of landing and implementation of the RRR cut shows the management’s high attention and determination to stabilize financial market confidence.
2. The purpose of the RRR cut: to strengthen cross-cyclical regulation and better support the development of the real economy. The central bank stated that the purpose of this RRR cut is to strengthen cross-cyclical regulation, optimize the capital structure of financial institutions, improve financial service capabilities, and better support the real economy. Compared with the statement on the RRR cut in July, the expression “strengthen inter-cycle regulation” has been added. At present, the economy is in the stage of transition from high-speed growth to high-quality development. It is necessary to do a good job of cross-cycle design and counter-cyclical adjustment in time to avoid large fluctuations in macroeconomic operations. At the same time, nearing the end of the year, the importance of stable funding for the new year has increased. The RRR cut is expected to bring support to the recovery of the economy and market liquidity. At the same time, the central bank also mentioned that the purpose of the RRR cut is to “effectively increase the long-term stable funding sources for financial institutions to support the real economy”, “guide financial institutions to actively use the RRR cut funds to increase support for small and micro enterprises”, and “promote reductions. Social comprehensive financing costs” etc. It shows that the central bank’s RRR cut aims to increase financial support for the steady growth of the real economy, stimulate the financing demand of the real economy, and enhance the vitality of market operations.Since the beginning of this year, the central bank has continued to perform prudent operations,RepurchaseOperational usage, high MLF continuation, and keeping LPR unchanged for 20 consecutive months, etc., indicate that the policy still supportsBankMaintain moderately loose liquidity in the medium and long term, and maintain the stable operation of funds.The RRR cut will effectively drive the marketinterest rateDown and deposit tointerest rateConduction, reliefBankNarrowing pressure on the net interest margin will eventually lead to a downward trend in loan interest rates.Social harmony from OctoberCreditFrom the data point of view, although all showed a year-on-year increase, the structure continued to deteriorate. Medium and long-term loans to enterprises have maintained a year-on-year decline for four consecutive months, reflecting the decline in enterprises’ willingness to invest in the future.At the same time current small businesses SMEsIt has been below the line of prosperity for 7 consecutive months. At the same time, although the current commodity prices are moderately slow, they are still in the high range. The high commodity prices will raise the production and operation costs of small and medium-sized enterprises and increase the operating difficulties of operating small and medium-sized enterprises. In addition, the RRR cut may indirectly reduce corporate borrowing costs, stimulate corporate financing needs, and increase support for small and medium-sized enterprises.
3. Highlight the autonomy of monetary policy. The expected release of long-term funds of about 1.2 trillion yuan. The RRR cut highlights the autonomy of my country’s monetary policy and effectively responds to internal and external pressures. From the perspective of the external environment, global inflationary pressures continue to rise, and the loose macroeconomic policies of central banks of various countries are gradually receding, which brings uncertainty to the subsequent economic recovery.MidlandThe Chuan started Taper in November as scheduled and began to reduce the scale of bond purchases. However, the time for the interest rate hike has not yet been clarified. The market expectsMidlandThe Reserve Bank will raise interest rates in the second quarter of next year.Thus, inMidlandDuring the period before the interest rate hike by the Reserve Bank, it has become more and more important for my country to take good care of the fundamentals of the domestic economy and ensure stable economic growth. At present, the autonomy of my country’s monetary policy is more prominent, and the exchange rate also has greater operational flexibility. Choosing to cut the RRR at this point in time can stabilize the domestic economy while also being able to better resist potential shocks brought by external factors in the future. The central bank made it clear that the orientation of prudent monetary policy has not changed, adhere to normal monetary policy, and refrain from flooding. The RRR cut is a routine operation after the monetary policy returns to normal. A part of the released funds will be used by financial institutions to return expired medium-term loan facilities (MLF), and some will be used by financial institutions to replenish long-term funds for better satisfaction. The needs of market entities. From the data point of view, there will be 950 billion yuan of MLF due on December 15th. This time the RRR cut will release a total of about 1.2 trillion yuan in long-term funds, which will hedge the maturity liquidity to a certain extent and release medium and long-term funds. At the same time, inflationary pressure remains to be seen. The possibility of total easing of monetary policy in the short-term is still small. Maintaining stability and looseness is still the current first choice.
4. Impact on the market: The RRR cut releases a positive signal, the market is expected to pick up, and the new year’s market is expected. Pay attention to the finance, real estate, new energy industry, medicine, TMT industries, etc. The RRR cut is a comprehensive reduction. It will not only directly reduce the capital cost of financial institutions by about 15 billion yuan per year, but also promote the reduction of social comprehensive financing costs through the transmission of financial institutions, drive a moderate decline in capital costs, and alleviate the financing difficulties of SMEs. , The problem of expensive financing, promote the steady recovery of the economy, and support the development of the real economy.In our previous release of “DongguanSecuritiesA-share investment strategy for the first half of 2022: “Consolidate the foundation and build a strong foundation and move forward steadily”, we clearly stated that “the domestic economy in the first half of 2022 will be based on China’s keynote, the domestic economy will moderately fall in the second half of 2021, and the expected growth will be stable. Under the circumstances, domestic monetary policy may release liquidity in stages. It is not ruled out that the central bank may cut its RRR in the first quarter of 2022. It is expected to have a good start to the stable operation of the economy in 2022. “The economic growth rate will gradually return to the normal potential growth target. The probability of stabilization after the first low for the whole year has increased, coupled with a moderate short-term easing of inflationary pressures, policy support for the real economy is expected to increase moderately in the first half of the year, and there is a period of loose monetary policy. Economic recovery and market liquidity bring support.” The RRR cut is in line with our expectations, and the timing is slightly earlier, showing the management’s trend of fine-tuning the monetary policy. Due to the relatively large scale of this RRR cut to hedge the maturity funds, the actual amount lies in the care and support of the funds at the end of the year. Judging from the past few years, the central bank has cut its RRR three times in 2019 and 2020, and in 2021 the central bank has cut its RRR twice (plus this time). Considering the pressure of the real economy, the expected steady growth in the first half of next year is still strong, and we expect that there will still be the possibility of lowering the RRR in the future to achieve steady economic operation. From the market point of view, the current RRR cut will release a positive signal, which is expected to have a positive impact on the market and drive the market to pick up.We are in “DongguanSecuritiesThe A-share investment strategy for the first half of 2022: Consolidate the capital and cultivate the yuan, move forward steadily” clearly stated that “at the beginning of 2022, the marginal improvement of liquidity, policy fine-tuning, policy expectations of the two sessions, and common prosperity will bring about incremental capital allocation requirements and other factors. Driven by this, it is expected to change the sideways pattern, move forward steadily, and usher in a volatile upward trend”, and the RRR cut is gradually verifying our judgment, and the market is expected to be expected in the new year.From an industry perspective, the RRR cut will benefit capital-sensitive, bulk commodities, highDividendsHigh-dividend blue chips and sectors with strong funding needs.Specifically, capital-sensitive industries includeBank,estate,BrokerageIn the sector, the incremental funds released by the RRR cut will expand the business needs of these sectors and bring benefits. At the same time, for industries with strong funding needs, the RRR cut means that companies will increase their ability to obtain funds and reduce the cost of obtaining funds. Therefore, the RRR cut is good for industries with tight capital chains and large financing cash flows, such as the new energy industry, Medicine, TMT industry, etc.
Risks suggest that domestic and foreign epidemics have repeated; the risk of banks’ non-performing assets has increased.
(Article source: DongguanSecurities）
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