China-Singapore Jingwei, February 5 (Wang Yongle) On the 5th, the central bank officially lowered the required reserve ratio, providing 1 trillion yuan of long-term liquidity to the market. How does it affect the stock, bond and housing markets?

　　The so-called RRR cut is to increase the funds that banks can use freely by reducing the proportion of deposit reserves that financial institutions pay to the central bank as required by regulations to their total deposits.

　　This is the first time the central bank has cut the reserve requirement ratio this year. It is also the first time since April 2022 that it has extended the reserve requirement ratio to 0.5 percentage points after four consecutive cuts of 0.25 percentage points.

　　Ming Ming, chief economist of CITIC Securities, said that the timing and scale of this RRR cut exceeded market expectations, reflecting the central bank's clear support for the goal of restoring the real economy. In January, there was a large liquidity gap amid seasonal increases in cash demand. It is expected that the liquidity environment will further improve after the implementation of this RRR cut.

How does it affect the stock market?

　　Recently, the A-share market has become more volatile. On February 2 (last Friday), the Shanghai Stock Index regained 2,700 points, once hitting a new low since March 2020.

　　Guangkai Chief Industry Research Institute analyzed that based on historical experience, the RRR cut will bring more liquidity support to the capital market, especially for listed companies in the banking, real estate, manufacturing and consumer industries. It will have a positive effect on Boosting investor confidence is a boon.

　　Yang Delong, chief economist of Qianhai Kaiyuan Fund, called the RRR cut "timely rain". This is the central bank's policy to support the development of the capital market and will help boost market confidence.

　　"2024 has had a bad start, and the market has experienced a relatively large decline in January, but this does not mean that there will be no opportunities throughout 2024." Yang Delong said that in 2024, A-shares and Hong Kong stocks are expected to be prosperous and have a structural bull market. , and these high-quality stocks and high-quality funds that were mistakenly killed will have the opportunity to obtain excess returns.

　　The strategy report of Guosen Securities believes that at this stage, the stock market is facing relatively complex long-short factors, with RRR cuts, interest rate cuts, and northbound inflows being multi-party forces. However, weak fundamentals and low trading sentiment have also hindered the upward movement of the stock market. Looking forward to February, economic data and policy releases are lagging behind, and the Spring Festival holiday effect may have a drag on the recovery of trading volume. The stock market is expected to remain in a volatile range.

The impact on the bond market is highly uncertain

　　The overall performance of the bond market was strong in January, with both long-term and short-term interest rates falling, with the long-term interest rate once falling below 2.5%.

　　Galaxy Securities believes that the central bank's RRR cut will release about 1 trillion in medium and long-term funds, and it will also play a short-term role in protecting liquidity during the Spring Festival. Past experience shows that capital fluctuations around the Spring Festival have been smaller under the protection of the central bank. Since mid-to-late January The rising stock of reverse repurchases and the relative abundance of funds also show the central bank's intention to maintain stability. Fluctuations in funding may decline in February, and upward pressure on funding rates is limited.

　　Huafu Securities analyzed that historically, the impact of RRR cuts on the bond market is highly uncertain. On the one hand, RRR cuts provide liquidity to the market and help alleviate funding pressure, which is conducive to the decline of short-term interest rates. On the other hand, RRR cuts often mean the start of a policy cycle to stabilize growth, which will have a certain negative impact on long-term interest rates.

Good for real estate

　　Yan Yuejin, research director of E-House Research Institute, said that previous RRR cuts will involve the issuance of bank loans, especially those related to housing loans. This year, all localities should continue to do a good job in real estate work, especially real estate development loans, support for guaranteed housing, liquidity support for real estate companies, support for reasonable housing needs, and loan support for urban villages and affordable housing. The characteristic of this year is that there are many key areas that require loans, and the urgency of getting funds is high. Therefore, the RRR cut will still have a positive supporting effect on various real estate subdivisions.

　　"The RRR cut will also have a direct impact on the home purchase market. It represents a signal of easing, and will especially help local banks to solidly implement the operation of reducing down payments and mortgage interest rates. This will be positive for boosting the demand for home purchases in 2024. It will also directly support the home buying market during the Spring Festival holiday." Yan Yuejin further analyzed.

　　The Guangkai Chief Industry Research Institute reported that in 2023, the central bank lowered the deposit reserve ratio twice, maintaining reasonable and sufficient liquidity and ensuring that the total amount of money and credit is moderate and the rhythm is stable; it lowered the policy interest rate twice, driving up the loan market quotation rate. When market interest rates fall, we will guide commercial banks to orderly reduce existing first-home loan interest rates; guide more funds to flow to weak links such as private small and micro enterprises and rural revitalization, supporting the stable and healthy development of the real estate market.

　　Guangkai Chief Industry Research Institute believes that for the real estate market, the comprehensive use of RRR cuts, interest rate cuts and structural policy tools can effectively protect the reasonable financing needs of real estate companies. The scale of financing available to real estate companies has increased, financing costs have dropped, and the phenomenon of "difficult and expensive financing" has been gradually alleviated. (China-Singapore Jingwei APP)

(The opinions in this article are for reference only and do not constitute investment advice. Investment is risky, so please be cautious when entering the market.)