China and Singapore Jingwei client on March 14th (Wei Wei) directed the reduction of the "big gift package". The People's Bank of China announced on March 13 that it decided to implement targeted inclusive financial cuts on March 16, 2020, and targeted reductions of 0.5 to 1 percentage point for banks that met the assessment criteria. In addition, the qualified joint-stock commercial banks will be further reduced by 1 percentage point to support the issuance of loans to the inclusive financial sector. The above-mentioned targeted RRR cuts totaled 550 billion yuan of long-term funds.

This is the second time this year that the RRR cut. On January 1, this year, the central bank announced its decision to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on January 6, 2020. How is this downgrade different from before? Why did you choose to lower the accuracy at this time? Who will benefit from this round? These issues have caused widespread market concern.

Pratt & Whitney's targeted reduction in support of real economy development

The purpose of this targeted reduction is to implement the "quickly introduce inclusive financial targeted reduction measures, and increase the reduction of joint-stock banks" proposed by the State Council executive meeting held on March 10.

What is inclusive finance loans? The central bank points out that the loans include loans to farmers for production and operation, loans to the poor for the establishment of files, education loans, business guarantee loans, business loans for individual businesses, business loans for small and micro-enterprise owners, and loans granted to single households less than 10 million. Small business loans, micro-enterprise loans with a single household credit of less than 10 million.

The assessment targets include large banks, joint-stock banks, city commercial banks, larger rural commercial banks and foreign banks.

In fact, since 2018, the central bank has established an annual review system for inclusive financial targeted reductions, giving large and medium-sized commercial banks with a percentage of loans in the inclusive financial sector a reserve ratio of 0.5 percentage points or 1.5 percentage points.

"Under the regulatory pressure of the" two growths and two controls "of the Central Bank and the CBRC in 2019, inclusive financial credit has increased significantly, which has also led to the vast majority of banks meeting the requirements for the inclusive financial sector's targeted reduction, or from no preferential treatment to The 0.5% discount, or from 0.5% discount to 1.5% discount, released a relatively large scale of liquidity. "Li Qilin, chief economist of Yuekai Securities, told reporters from China and Singapore.

The central bank stated that the targeted downgrade will release 550 billion yuan of long-term funds, of which 400 billion yuan will be released for banks that meet the criteria for inclusive financial downgrade assessment, and an additional 1 percentage point will be targeted for eligible joint-stock commercial banks. Release 150 billion yuan of long-term funds.

Who would benefit from releasing long-term funds? The relevant person in charge of the central bank said that the targeted reduction of long-term funds has effectively increased the bank's stable source of funds to support the real economy, and can directly reduce the cost of interest payments of relevant banks by about 8.5 billion yuan each year. It is beneficial to promote the reduction of small, micro, and private enterprises through bank transmission. The actual interest rate of corporate loans directly supports the real economy.

"The targeted RRR cuts take into account both proactive promotion and after-the-moment incentives. Using market-oriented reforms to unblock the transmission of monetary policy will help stimulate the vitality of market players, further play the decisive role of the market in the allocation of resources, and support the development of the real economy." People said.

Shareholding banks' additional RRR cuts are intended to support SMEs

In this targeted reduction, the targeted reduction of joint-stock commercial banks has attracted market attention. What is the significance of the central bank's operation?

Wang Qing, chief macro analyst of Dongfang Jincheng, believes that there may be three main reasons: First, in China's banking system, compared with state-owned banks, city commercial banks and rural commercial banks, the deposit-to-loan ratio of joint-stock banks is at the highest level, as of the end of 2018. The overall deposit-loan ratios of the 46 listed state-owned large banks, stock banks, city commercial banks and rural commercial banks were 72.13%, 96.59%, 69.41% and 70.72%, respectively. This means that in the process of increasing credit, joint-stock banks face greater constraints on the source of loanable funds, and additional RRR cuts will directly improve the credit-supply capabilities of joint-stock banks.

Secondly, compared with deposits and wholesale financing in the open market, the additional reduction is equivalent to providing a joint-stock bank with a near zero cost of funding. This will, to a certain extent, encourage these banks to lower their lending rates to enterprises, which is in line with the current policy goal of reducing the financing cost of the real economy.

Finally, compared with state-owned banks, joint-stock banks have more SME customers. In this sense, additional reductions are actually a targeted reduction in support of SMEs.

Dong Ximiao, a specially-appointed researcher of the National Finance and Development Laboratory, analyzed that first, due to the fact that the first 300 billion yuan of special reloans were not covered by joint-stock banks, the second 500 billion yuan of reloans and rediscounts mainly covered small and medium banks (such as city commercial banks) , Rural commercial banks, etc.); Second, joint-stock banks do not have large-scale banks with branches throughout the country, nor do city commercial banks and rural commercial banks have a strong geographical and personal advantage. The debt pressure and cost are relatively greater.

Dong Xiaomiao pointed out that the implementation of additional stock reductions for joint-stock banks and targeted release of long-term low-cost liquidity can encourage them to take advantage of market-oriented institutional mechanisms and increase their efforts to serve the real economy, especially small, medium and micro enterprises.

Positive stock market bond market

Recently, the spread of overseas epidemics has brought some negative impacts. The overseas financial markets have been turbulent. US stocks have melted twice a week. Stock markets in more than a dozen countries around the world have also suffered meltdowns, and risk assets such as Bitcoin have plummeted. What impact will this RRR cut have on stock and bond markets?

"The central bank's RRR cut is just in time. Against the background of the current continuous slump in the external market and lack of market confidence, the central bank's RRR cut is undoubtedly a timely rain, which will further support the strengthening of the A-share market and benefit banks, real estate, and securities companies." Yang Delong, chief economist of Qianhai Open Source Fund, told reporters from China and Singapore Jingwei.

Fan Ruohuan, a researcher at the Bank of China Institute of International Finance, also believes that this targeted RRR cut is conducive to maintaining the stability of the stock market. On the one hand, it stabilizes investor confidence in a timely manner to avoid the spread and enlargement of market irrational emotions; on the other hand, it releases liquidity. Bring certain incremental funds to the market.

However, Dong Ximiao emphasized that since the reduction was expected, the actual effect after the expected fulfillment remains to be seen.

In terms of investment strategy, Li Qilin analyzed that the easing of overseas central banks may cause risk assets to rebound in the short term and disturb the bond market. However, as long as the epidemic spreads, the easing will not make the overall demand significantly improve and the global recession will decline. The risks of China will continue to increase, and the Chinese economy, which has been under control and the policy space is relatively more abundant, will begin to repair gradually. RMB assets are relatively better choices.

In terms of the bond market, Fan Ruohua pointed out that this targeted RRR cut is also good for the bond market. The release of sufficient liquidity through the RRR cut will bring down the overall market interest rate. In addition, in the context of severe fluctuations in global financial markets, the attractiveness of China's bond market to foreign investment will further increase.

In Li Qilin's view, in the short term, bonds may have some adjustment pressure. "The expectation of monetary easing is already relatively sufficient. In the short term, there may be some adjustment pressure due to concerns about domestic economic resumption to speed up economic repairs and the positive impact of loose boots on the ground."

However, he further pointed out that in the medium term, under the multi-objective environment of not only preventing and controlling hidden debts, but also not relaxing real estate regulation, there is uncertainty about whether aggregate demand can meet market expectations, and interest rates remain high after adjustment. Transaction value.

Financial product yields may fall further

Will the cut in accuracy affect financial returns? "The RRR cut has no direct relationship with the return on wealth management products. It is not that the more the deposit reserve ratio of joint-stock banks decreases, the more the return on wealth management will decrease." Liu Yinping, an analyst at Rong 360 Big Data Research Institute, is accepting Xin Jingwei reporter said in an interview.

Liu Yinping explained that the central bank's RRR cut is intended to reduce the cost of interest payments by banks, promote the decline in interest rates on loans, and support the development of the real economy. Market funds will be more accommodative.

However, she pointed out that because the yield of bank wealth management is affected by the overall interest rate market environment, after the central bank's RRR cut, market liquidity will be more accommodative, and the yield of wealth management products of various banks will further decline.

Downgrades help keep the real estate market stable

Under the epidemic, the property market has also been affected and sales have fallen. People in the industry generally believe that the RRR cut is not aimed at the real estate market. The stable funds brought by the RRR cut are conducive to the stability of the real estate market, but at present, there is no significant change in the orientation of the real estate control policy.

Zhang Dawei, the chief analyst of Zhongyuan Real Estate, pointed out that from the past, downgrading is a good thing for real estate, which can ease the financial pressure of real estate companies. In addition, for buyers, mortgages can also obtain relatively stable credit prices.

He said that the cut in the epidemic situation will increase the preferential interest rates for home buyers, and some banks may adjust the standards for the identification of first homes. After all, real estate loans are still a high-quality credit business for most banks.

"The increase in the amount of commercial bank loans objectively makes the motive for reducing the down payment greater." Yan Yuejin, research director of the Think Tank Center of the E-House Research Institute, believes that since real estate credit assets are relatively high-quality assets, from the perspective of banks' hedge of non-performing assets, Objectively, it will strengthen the issuance of mortgages, especially by reducing the down payment to promote the formation of more mortgage loans.

Yan Yuejin pointed out that the RRR cut provides more funds and liquidity for commercial banks, so objectively there is also the possibility of actively lowering interest rates in terms of loans, or in the near future, discounts and concessions on house purchases will increase.

He also emphasized that the inspection of the housing loan market will continue, and the control of housing and housing speculation in various places will continue. In the subsequent business operations of real estate loans, it is also critical to prevent funds from entering the real estate in violation of regulations. It may be necessary to prevent such illegal lending practices in the future and further introduce mortgage resources into reasonable housing consumption needs.

LPR or will decline further

Due to the pressure of commercial banks' debt costs and net interest margins to continue to narrow, the current motivation for banks to cut LPR is clearly insufficient. Therefore, after the targeted downgrade, whether the LPR will be lowered in March is also the focus of market attention. During the interview, most analysts believe that the LPR may be further reduced this month.

Wang Qing expects that the MLF interest rate will be further reduced by 10 basis points in the second quarter, which will lead LPR prices to continue to decline. He pointed out that the emergency rate cut by the Federal Reserve on March 3 means that a new wave of global interest rate cuts has begun, which undoubtedly increases the room for domestic policy interest rate cuts. Considering that the central bank has already lowered MLF and the open market reverse repurchase policy interest rates in February, from the perspective of grasping the policy rhythm, the bidding interest rate may remain unchanged during the MLF operation in March.

"The crisis is currently at a critical period for epidemic prevention and economic recovery. We still need to increase counter-cyclical control and maintain reasonable and adequate liquidity." Wen Bin, principal researcher at China Minsheng Bank, predicts that the RRR cut will lead to a decrease in LPR this month5 Basis points.

Wang Qing believes that the process of market-oriented interest rate reduction in March will continue, and it is expected that the one-year LPR quote on March 20 may be reduced by 5-10 basis points. Recently, the interest rate of funds in the open market continues to be low, which can provide support for commercial banks to lower their LPR prices.

Wen Bin pointed out that in the next stage, there is still room for RRR cuts and interest rate cuts. To grasp the time window, you can also reduce the benchmark interest rate on deposits in a timely and modest manner, further reduce the cost of bank liabilities, and guide the decline in financing costs. (Zhongxin Jingwei APP)

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