Guotai Junan: Four changes in the macro budget vs. five changes in the overall tone of the currency

Guotai Junan: Four changes in the macro budget vs. five changes in the overall tone of the currency

How to see the initial rebound of leverage on the policy under the contraction of the counter-cyclical (Zhang Jie, Changchun Hua) Source: Macro Changchun Guided Conference First quarter of 2019 monetary policy implementation report and a quarterly regular meeting reached, the first quarter of the Politburo meeting remained consistent,It must be considered narrow, and it is a detailed version of the regular meeting announced in April.

The core concerns in the second quarter are three points: the strengthening of financial stability goals;

  Abstract With the economic downturn and the need for financial stability, the overall loose tone has not changed, but the looseness of strength and the tempo margin have dropped, and the specific operation has returned to “structural”. There are four changes in the core of judgment on the macro scale: better than expected;Prominent “structural contradictions”; proper external economic environment; “uncertain factors increased” proposed for price indicators; changes in the expression of “general tone” in the first quarter of 2019, and the general tone of monetary policy continued.
This is different from the 4Q 2018 monetary policy implementation report. Compared with 4Q 2018, one decrease and three increases reflect the three important changes in the next stage of monetary policy: 1. Currency, credit scale reconfirmed the second quarter currency, credit issuanceIt will decline earlier in the first quarter; 2. Monetary policy tools will be mainly used in the next stage, targeted and structural tools, and the possibility of a full-scale reduction throughout the second quarter is unlikely; 3, the “financial stability” target is strengthened again, and financial market volatility will triggerInitial attention and action.

This is reflected in the increased “prevention of financial risks” statement; there is no deliberate expansion of the exchange rate issue, indicating that subsequent exchanges will more closely follow the inherent and self-generating forces and trends of the market; “expanding opening up” is a marginal supplementary point, focusing on the second quarterImplementation of policies.

The “12” proposed by Chairman Guo is an important main line; the potential breakthrough point for advancing the “two-track and one-track” interest rate may be “LPR”.

The room for the growth of M2 and social financing in 2019 depends on upward changes in nominal prices.

The key to how to roughly increase the growth rate of M2 and social financing is to match the “nominal GDP growth rate”.

“The current actual economic growth rate is similar to the potential growth rate.”

  On the whole, the implementation of the monetary policy report in the first quarter of 2019 at the beginning of 2019 and the quarterly first quarterly meeting. The Politburo meeting in the first quarter remained consistent. To a certain extent, it can be regarded as the detailed version of the regular meeting announced in April.

With the economic downturn and financial stability required, the overall loose tone has not changed, but the looseness and the margin of rhythm have dropped. The specific operation has returned to “structural”.

  First, there are four changes in the core of the judgment on the macro scale: better than expected; the “structural contradictions”; the adjustment of the external economic environment; and the increase in the price index of “uncertain factors”.

  In the first quarter of 2019, the gradual attitude towards the domestic economy was gradually more optimistic than in the fourth quarter of 2018, reducing the expression of “the economy is stable and changing, and the situation is worrying.” However, it is believed that external pressures remain and the economyDownward pressure remains.

(1) On the domestic side, in the fourth quarter of 2018 report, it was previously believed that “the long-term accumulation of risk hazards has spread during the transition period between new and old kinetic energy, and the financing difficulties of small and micro enterprises and private enterprises have expanded, and the economy is facing downward pressure”, andIn the report for the first quarter of 2019, it stated that “China’s economic operation is generally stable, better than expected, the pace of conversion of new and old kinetic energy is accelerating, and economic growth remains unchanged.””.
(2) On the foreign side, in the report for the fourth quarter of 2018, it was expected that “the global economy continues to recover, but the external environment has changed significantly and uncertain factors have increased.” In the first quarter of 2019, “the external economic environment is generally tightening.”.
  Price expectations continue the tone of the fourth meeting of the Central Finance Committee, noting some new changes in price forecasts, and mentioning “an increase in uncertainty”.

However, on the whole, the previous judgment on the expected growth trend has gradually shown excessive concerns.

There are three main points: (1) the core CPI is generally stable; (2) disturbance caused by African swine fever and crude oil; (3) continuous monitoring of future changes.

  Second, there are five changes in the core of the overall monetary policy and key tasks in the next phase. In the next phase, the core of the overall monetary policy is mainly reflected in the following statement: “Prudent monetary policy remains tight and moderate, and is implemented in a timely and appropriate manner.Counter-cyclical adjustment, timely pre-adjustment and fine-tuning according to economic growth and price changes, pay attention to maintaining a reasonable growth of money and credit, optimizing the balance between credit structure and preventing financial risks. ”

This includes five points: First, the expression of “general tone” in the first quarter of 2019 has continuously changed, and the general tone of monetary policy has continued.

This is different from the 2018 4Q monetary policy implementation report.

The core of the fourth quarter of the 2018 executive report revolved around the shift of the general tone of monetary policy from “stable and neutral” to “stable”. The general tone of the statement removed the “neutral”, indicating that monetary policy was more active (implemented by the 2018 Central Economic Work Conference).

In the third quarter of 2018, “stable monetary policy should remain neutral and moderately tight”. In the fourth quarter of 2018, it was changed to “stable monetary policy and moderately tight”. In the first quarter of 2019, it was “stable monetary policy and maintained moderately tight”, which increased.The word “keep”.

  Second, compared with the fourth quarter of 2018, one decrease and three increases will realize several important changes in the next stage of monetary policy: 1. Currency and credit will be reconfirmed in the second quarter, and credit will be lower than the previous quarter.

This is reflected in the deletion of the phrase “maintaining a reasonable and sufficient liquidity of the banking system and a reasonable and stable level of market interest rates”.

At the same time, it is reflected in the change from the term “promote” to “maintain” (that is, from 4Q 2018 “Promote the reasonable growth of monetary credit and social financing scale” to 1Q 2019 “Maintain the reasonable growth of monetary credit”).

This is consistent with the Politburo meeting in the first quarter and the regular first quarter transition.

  2. In the next stage, monetary policy tools will mainly use targeted and structural tools, and the overall reduction in the second quarter is unlikely.

This is reflected in supplementing the “optimizing credit structure” formulation.

In the follow-up, from the repetition of the liquidity gap in June and July, more focus will be placed on targeted reductions, TMLF increase sequels (July), and so on.

Figure 1: Two observation points of the “wind direction” of monetary policy June 6 and July 23 (from the perspective of MLF termination sequel) Figure 2: The liquidity gap in July was 1.

3 trillion (MLF expiry + tax payment) 3, the “financial stability” target has been strengthened again, and changes in the financial market will trigger attention and action.

This is reflected in the increased expression of “prevent financial risks”.

  4. There is no intention to predict the exchange rate problem, which indicates that the subsequent exchange rate will be more in line with the inherent and self-generating forces and trends in the market.

The first quarter of 2019 is exactly the same as the fourth quarter of 2018.

  5. “Expansion of opening up to the outside world” is a marginal supplementary point, and we are concerned about the implementation of relevant policies in the second quarter.

For details, please refer to the new Article 12 of Banking Insurance, Chairman of the China Banking Regulatory Commission (CBRC), such as the cancellation of the foreign exchange bank’s limit on shareholdings in Chinese banks and other banking insurances.

  Third, three issues of concern from the column of the current monetary policy implementation report This column of the monetary policy implementation report discusses five issues: supporting moderate development with modest monetary growth; a new framework of “three-grade and two-excellent” reserve requirements; Steady progress in the “two-track-in-one” interest rate; positive results of China’s financial opening; analysis of potential economic growth; structural deleveraging and a sound monetary policy.From 深圳SPA会所 this, we can interpret some of the core issues that the current transition and the market care about.

  First, to push the interest rate “two tracks into one track” again, the potential breakthrough point may be “LPR”.

(1) The core of reducing the “reduction of the real interest rate level” (proposed by the “Government Work Report”) is to reduce the risk premium, rather than continue to expand the liquidity of the banking system and reduce the risk-free rate of return (money market interest rate stability).

This is also consistent with the statement made by President Yi Gang during the two sessions; (2) Steady promotion of the “two tracks and one track” of loan interest rates, with the focus on further promoting market-based loan pricing mechanisms.

From international experience, economies such as the United States, Japan, and India have established quotation mechanisms similar to the basic loan interest rate (LPR).

  Second, a reserve ratio of “three gears and two excellents” was established.

This is a merger of the State Council’s executive meeting held on April 17 to “accelerate the establishment of a policy framework for deposit reserve ratios for small and medium banks”.

Measures to further reduce the financing costs of small and micro enterprises as determined by the forthcoming conference include: “The five conventional large commercial banks that have established diplomatic relations between workers and peasants should take the lead to ensure that loans to small and micro enterprises increase by more than 30% this year.On the basis of reducing the number by one “and so on.

  Third, the opening up and continuous advancement of the financial industry, and the implementation of relevant policies need to focus on in the second quarter.

The relevant main line is the opening of 12 new banking insurances, such as the cancellation of the cap on foreign banks’ shareholding in Chinese banks, proposed by Chairman Guo Shuqing in an interview with the People’s Daily and others.

  Fourth, how to deal with the response to the pressure of leverage rebound pressure under the contraction of the counter-cyclical cycle. Of the five columns, three can be said to be related to the M2 and social financing growth rate and nominal GDP matching issues raised in the fourth quarter of the 2018 monetary policy implementation report.

This shows that from the perspective of the government’s macro-scale, it really cares about the pressure of leverage rebounding under the counter-cyclical adjustment.

In this regard, there is a bias in understanding the market and emerging markets.

In other words, the market is worried about unexpected problems under the reversal of the pig cycle regarding the adverse factors of the follow-up policies.

But the government’s macro-scale may be more concerned about rebounding leverage.

After all, in 2017 and 2018, the stability of the macro-leverage ratio did not come easily (Note: According to data from the National Finance and Development Laboratory, the leverage ratio of the real economy in 2018 was 243 in 2017.

99% dropped to 243.

70%, a decrease of 0.

3 averages.

From a structural point of view, non-financial corporations have increased their deleveraging efforts, and the leverage ratio of residents and government departments has increased, and the leverage ratio of the financial sector has further declined).

Figure 3: The leverage ratio of the real economy in 2018 decreased from 244% in 2017 to 243.

7% 1, the other side of monetary policy counter-cyclical expansion and overweight, is to keep the leverage ratio relatively stable.

This is how the 4Q 2018 monetary policy implementation report puts forward, in terms of how to define a “sound” monetary policy: quantitatively, the growth rate of M2 and social financing scale should roughly match the growth rate of nominal GDP—the former corresponds to theThe numerator corresponds to the denominator of the leverage ratio (Note: from a price point of view, the interest rate level should meet the requirements to keep the economy at a potential level).

  2. In 2019, the growth rate of M2 and social financing will have room for improvement in nominal prices.

The key to how to roughly increase the growth rate of M2 and social financing is to match the “nominal GDP growth rate”.

Both the columns “Supporting nominal growth with modest monetary growth” and “Structural deleveraging and prudent monetary policy” highlight this issue.

This involves two factors: real GDP growth rate + nominal price factor.

For the former, the core indicator of this report’s analysis column “Economic Potential Growth” is “The current actual economic growth rate is similar to the potential growth rate, and the displacement gap is close to zero.”

This implies two points: First, from the point of view of 4Q 2018, “From a price point of view, the interest rate level should meet the requirements to keep the economy at a potential level”, and it is implied that the use of short-term interest rate instruments is unlikely.

Second, whether M2, credit, social financing, etc. have room for further improvement depends on the change in nominal prices.

From the perspective of keeping the leverage ratio from rebounding, the nominal price increases fast and upwards, but it will increase the space for counter-cyclical displacement, that is, the space for the leverage “Molecule”-M2, credit, and social financing.

  3. Different understanding logic determines the market’s view of pigs and the government. There has been a long-term deviation.

This focuses on several points: (1) from the perspective of the two goals of economy and price, the current focus is gradually on “economic” (downward pressure) rather than sudden changes; (2) from the trigger of policy shift, macroThe difference is more worried about the rebound of leverage (including housing prices, etc.) without causing it; (3) From the internal logic of leverage and nominal prices, the supply-side pigs gradually push their prices to rise moderately, which will increase to a certain extent ((Not regular) counter-cyclical contraction space.

Figure 4: Comparison of the growth rate of assets and liabilities in the financial sector, the next stage is still ample debt, the next found asset problem Figure 5: The financial leverage ratio in the past two years has shown a decline than the physical leverage ratio Figure 6: The past two yearsIn leverage, the substitution relationship between residents and the corporate sector leverages money, and people exchange different mental measurements of the same thing; through stocks, people exchange different views on certain issues at a specific stage, which is finally completed through transactions.Expression and exchange of cognitive differences.

The cognitive bias is because we all look at the world from our own standpoints and perspectives.

The world is always that world, but in the end we see a different side.

Cognitive deviation also comes from our reversal of cause and effect on things, with “effect” as “cause” and “surface” as “li”.

Lost in the “relative”, never reach the “absolute” ethereal and freedom.

Investment is a kind of cultivation. It is the cultivation of the height, breadth, and depth of one’s own cognitive system, with a view to transcending the boundaries of everyone’s understanding, and unimpeded access to the realm of investment.

  Table: Comparison of Monetary Policy Keynotes in 1Q 2019 and 4Q 2018