the beginning of the shift, four points of understanding of the package policy
2024-09-26
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event:on september 24, the people's bank of china, the china securities regulatory commission, and the state administration of financial supervision issued a package of incremental policies, including lowering the reserve requirement ratio, lowering interest rates, reducing interest rates on existing mortgage loans, reducing down payment ratios for second homes, creating new monetary policy tools to support the stable development of the stock market, and formulating guiding opinions to promote the entry of medium- and long-term funds into the market.
core ideas:"the situation is stronger than people, and confidence is more important than gold." this is the beginning of the policy shift: as we have been reminding since august, this package of policies has arrived as expected, and the strength and methods can be described as "full of sincerity": there is not only the "relaxation of liquidity" (lowering the reserve requirement ratio/lowering interest rates/lowering the interest rate of existing mortgages/lowering the down payment ratio of second homes) that focuses on the present, but also the long-term institutional arrangements (new monetary policy tools to support the stock market/"long money and long investment"/market value management/mergers and acquisitions), and the "right medicine" to face the problem (the central bank has increased its investment in storage and re-loans to 100%). looking forward, it is expected that there will be many incremental policies on the way, especially expanding the deficit, issuing more treasury bonds, and loosening purchase restrictions in core cities. i tend to believe that the 9.24 package of policies will help stabilize confidence, the market, real estate, and consumption, and may be positive for stocks and bonds.
1. overall, against the backdrop of increasing economic pressure and insufficient confidence, as we have been reminding since august, the 9.24 policy package arrived as expected, and its strength and approach were "full of sincerity", which can be regarded as a policy shift.
2. looking ahead, it is expected that there will be many policies, especially fiscal efforts, loosening real estate, supporting local debt, and further lowering the reserve requirement ratio and interest rates. these may include expanding the deficit, issuing more treasury bonds, loosening purchase restrictions in core cities such as beijing and shanghai, canceling the distinction between ordinary and non-ordinary houses, and adding special refinancing bonds and special special bonds.
3. in terms of impact, this package of policies should help stabilize confidence, the market, real estate, and consumption, and also help to maintain the annual "5%"; it may be beneficial to both stocks and bonds, and it is recommended to pay great attention to subsequent investment opportunities in the equity market. the 10-year treasury bond interest rate is also expected to fall below 2% driven by the reduction in reserve requirement ratio and interest rates.
4. specifically, this package of policies has arrangements in the three major areas of total "flooding", real estate, and capital markets:
>in terms of aggregate tools, the reserve requirement ratio cut was in line with expectations, but the magnitude of 50bp was slightly higher than expected, and the reserve requirement ratio may be further cut at an appropriate time within the year; the magnitude of the interest rate cut was also higher than expected, and subsequent deposit rates, mlf rates, lpr, etc. are expected to be lowered simultaneously.
>in terms of real estate, five major policies have been implemented simultaneously, including lowering the interest rate on existing mortgage loans, lowering the down payment ratio for second homes, collecting and storing re-loans with 100% funding from the central bank, extending the policy period for supporting real estate companies, and supporting the acquisition of real estate companies' existing land.
>in terms of the capital market, the goal should be to enhance the stability of the capital market and support the capital market in serving high-quality development and new quality productivity. specifically, the central bank will create two new monetary policy tools to support stock market stability. there will also be substantive actions in the three directions of "long money and long investment", market value management, and mergers and acquisitions that the market has long called for.
risk warning:the strength or pace of domestic policies are lower than expected; unexpected changes in the us election, us economy, tariff policies, etc.; unexpected changes in great power games and geopolitics.
this article only reflects the author’s views.
