china’s financial market in august: rose slightly but remained stable overall
2024-10-05
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(the author of this article is tian xuan, deputy dean of tsinghua university pbc school of finance)
the "daokou financial barometer index" in august 2024 revealed a slight upward trend in china's financial market, which remained stable overall. however, year-on-year data indicate that market activity has decreased significantly and continues to show a tightening trend at this stage. equity and bond markets remain subdued, reflecting a lack of investor confidence, while non-traditional bank financial markets have performed strongly, demonstrating their resilience in the current economic environment.
index interpretation:
1. year-on-year data analysis by market:
stock market financial indicatorsit dropped from 21.62 in august 2023 to 18.5 in august 2024, a year-on-year decrease of 14%, showing a lack of investor confidence. this decline may be affected by slower economic growth, lower corporate profit expectations and increased external market uncertainty. the market has become more cautious about future expectations, and investors are paying more attention to risk control, resulting in a reduction in investment activities in the stock market. this situation requires policymakers to pay attention and take effective measures to boost market confidence and promote the steady development of the capital market.
macro leveraged financial market indicatorsit dropped from 23.2 in august 2023 to 16.9 in august 2024, a year-on-year decrease of 28%, showing a significant reduction in the use of leverage. this change may reflect a significant reduction in market risk appetite or tightening regulatory policies, making market participants more cautious when using leverage.
currency and interbank market financial indicatorsit fell from 28.8 in august 2023 to 23.9 in august 2024, a year-on-year decrease of 13%, indicating a reduction in interbank market activity and liquidity. among them, the balance of broad money (m2) will be 292.27 trillion yuan at the end of 2023, a year-on-year increase of 9.7%, and will increase to 305.02 trillion yuan in the first half of 2024, a year-on-year increase of 6.2%. this indicates that the growth rate of money supply is gradually slowing down, which may reflect the stabilization of financial policies and policymakers adopting a more cautious attitude to avoid the accumulation of financial risks, thus leading to a tightening of market liquidity and affecting the level of activity in the interbank market.
banking and credit financial markets,the indicator in august 2023 was 21.9, and fell slightly to 21.6 in august 2024, a year-on-year decrease of only 1%, which shows that the bank credit market remains relatively stable. in relative terms, the bond market financial indicator fell from 24.6 to 18.3, a year-on-year decrease of 26%, showing a significant reduction in bond market activity. this decline reflects the reduced activity of market participants in bond transactions. the decrease in bond market activity may be related to increased uncertainty in the overall economic environment, making investors more cautious. in addition, fluctuations in bond yields may also affect investor behavior, thereby inhibiting market activity.
non-traditional banking and financial marketsoutstanding performance among the six major financial markets, rising from 15.3 to 18.7, a year-on-year increase of 23%, showing a significant increase in activity in this market. this growth reflects the rising demand among market participants for non-traditional financial services, as non-traditional financial institutions provide more flexible and diverse financial products and services, attracting more customers and investors. this trend not only highlights the potential of non-traditional financial markets in promoting financial innovation and meeting market needs, but also creates certain competitive pressure on the traditional banking industry.
2. chain data analysis by market:
the stock market financial indicator fell to 18.5 in august from 18.7 last month, a month-on-month decrease of 1%, showing a slight decline in stock market performance this month. generally speaking, affected by the uncertainty of the global economic situation, the a-share market has experienced large fluctuations, and investor sentiment has been affected. the macro leverage financial indicator rose from 16.5 to 16.9, a month-on-month increase of 2%, indicating that the use of leverage increased slightly, but remained basically the same. lpr quotations remained unchanged in august. the central bank already lowered the lpr in july, and there is no need for further lowering in the short term. in addition, although the net interest margin of commercial banks remained flat month-on-month in the second quarter, they still faced greater pressure, and there is limited room for continued downward adjustments in lpr quotations in the short term. at the same time, market funding rates have recently bottomed out and the cost of market-based liabilities has increased, further limiting the room for lpr downward adjustments.
the money and interbank market financial indicator rose slightly to 23.9 from 23.7, a slight increase but essentially unchanged, indicating a slight increase in interbank market activity and liquidity. this may be due to the fact that the central bank lowered the deposit reserve ratio and lpr in july, which improved market liquidity and promoted an increase in inter-bank lending activities. data at the end of august showed that the balance of broad money (m2) reached 305.05 trillion yuan, a year-on-year increase of 6.3%, indicating that market liquidity is relatively abundant, which helps support the credit demand for economic growth. however, the balance of narrow money (m1) was 63.02 trillion yuan, a year-on-year decrease of 7.3%, which may reflect the weakening demand for corporate liquidity or the slowdown in short-term economic activities, resulting in insufficient liquidity. at the same time, the balance of currency in circulation (m0) was 11.95 trillion yuan, a year-on-year increase of 12.2%, showing an increase in public demand for cash, which may be related to consumption recovery or economic uncertainty. therefore, while the growth of m2 supports overall liquidity, the decline of m1 prompts the risk of a potential economic slowdown, while the growth of m0 indicates that the market demand for cash continues to rise.
the banking and credit financial market indicator remained at 21.6, unchanged from the previous month. the non-traditional banking financial market indicator fell slightly, from 18.8 to 18.7, but remained basically unchanged, indicating stable activity in this market. the bond market financial indicator fell from 18.5 to 18.3, a month-on-month decrease of 1%, indicating a slight decrease in bond market activity this month.
to sum up, although the overall performance of the six major financial markets was basically the same as last month, the overall financial market is still in a state of contraction. the slight decline in equity markets reflected the impact of global economic uncertainty on investor sentiment, while a modest increase in macro leverage indicators provided support to the market without significantly changing liquidity. at the same time, the pressure on commercial banks' net interest margins and the decline in narrow currency balances remind us that economic recovery still faces challenges. in the future, attention should be paid to the adjustment of monetary policy and its impact on market liquidity to respond to the credit needs of economic growth.
policy suggestions and opinions:
regarding china’s financial market conditions in august 2024, it is recommended:
consider further stimulus measures. at the same time, we will continue to support the development of non-traditional banking financial markets, encourage innovative financial products, and attract more investors to participate.it is also necessary to strengthen monitoring of the credit market, especially in the context of an economic slowdown, and to pay attention to the potential risks of non-performing loans.promoting information disclosure and transparency can enhance investor confidence and help attract more funds into the market.investors should consider a diversified investment portfolio to cope with market fluctuations and diversify risks.to sum up, although the "daokou financial barometer index" shows that china's financial market rose slightly in august and remained stable overall, it should be noted that the market is still in a state of contraction. this tight environment may limit capital liquidity and investment activity. in the future, policy adjustments and market changes need to be paid close attention to ensure the healthy development of the financial system and the continued recovery of the economy.
this article represents the views of the author only.
