【Zhang Chi January credit analysis】: External strength in the middle of the cadre, eager to achieve; maintain the prudent view of A shares unchanged! Coffee today January currency data released, simply put: M2 & social finance growth rate

【Zhang Chi January credit analysis】: External strength in the middle of the cadre, eager to achieve; maintain the prudent view of A shares unchanged!

Coffee today January monetary data released, simply put: M2 & social finance growth rate is more than expected; but M1 growth rate record low is in line with expectations.

🔥 First, the logic of two points that has previously emphasized M1 or is still weak has been verified. Including: 1) "enterprises are reluctant to use money", that is, production and investment inhibition still exists; 2) January 2021 is the high point of M1, there is a certain base pressure: in addition, coupled with a certain Spring Festival peaking effect, but even if the peak factor is excluded, the actual M1 is only about 3%, and there is no obvious improvement trend.

🔥 Secondly, the actual transmission of wide money to wide credit is still not smooth, and the effectiveness of the policy is not obvious. From the perspective of credit structure, there are two core indicators related to the expectation of economic fundamentals: 1) the growth rate of medium- and long-term loans to residents is -21.4%; 2) the medium- and long-term loans of enterprises have only increased by 2.9%. Obviously, on the one hand, the decline in housing loan demand has further expanded (December, -19%), which means that short-term real estate sales will be difficult to improve significantly, and the slowdown period of real estate investment growth will also be extended; on the other hand, January is often the peak of the absolute amount of medium- and long-term loans of enterprises, which reflects the characteristics of banks " early lending and early benefit " , and is in line with the capital needs of enterprises for annual production and expansion planning. From a historical point of view, the domestic economic recovery is expected to be strong in the years, including: 2009, 2016, 2017, 2020 and January 2021, the growth rate of medium- and long-term loans of enterprises has maintained "double-digit growth"; the superposition of medium- and long-term loans of 2.9% of enterprises in January this year with a M1 growth rate of -1.9% just shows that at least at the current point in time, the willingness of enterprises to produce and expand throughout the year is still weak, and the recovery of economic fundamentals is not optimistic.

🔥 Finally, from the perspective of key issues, how will the A-share market go under the above influence? I think there may be two logical deduction paths for your reference, and the conclusions may not be optimistic.

The first path of the rose is driven by the reversal of A-shares driven by economic fundamental expectations, the logic is the smoothest, but it is clear that it has not been achieved at present. Therefore, maintain the previous judgment, cautiously wait for M1 to rebound significantly, and it is really used for production and investment, in order to drive the medium- and long-term loans of enterprises to pick up, forming a real sense of wide money to wide credit (even if M1 rebounds, we should also observe the data of enterprise electricity consumption and real estate sales).

The other path for roses is the one I least want to see to return to the old road of "flood irrigation", and even if it is feasible, it still needs to be cautious - waiting for the core indicators to recover. In January, the growth rate of short-term loans of enterprises soared to 75%, and the total of "short-term loans + bill financing" increased by 173% year-on-year, where is still "wide credit", naked "wide currency"! Analogy is given to currency operations during crisis periods such as the "2008 financial crisis", "2015 global economic slowdown" and "2020.3 global epidemic". The logic can then be expanded into three scenarios:

A) If the central mother insists on using the currency cycle to guide the demand cycle, when will the A shares reverse? I believe that the core of the reversal of A-share growth in this context is the "liquidity surplus" driven by funds, and it is recommended to pay attention to the core indicator: "M1 growth rate - short-term financing growth rate". Whether M1 rebounds due to "idling" between financial institutions, or short-term financing due to corporate repayment, so that funds return to "idling" between financial institutions, it will bring obvious liquidity surplus in the A-share market, thus forming a currency-driven A-share market. However, it should be noted that the current "M1-short-term financing" is tending to decline and has a worsening trend, so it should also be maintained cautiously and wait for the expansion of "M1 growth rate- short-term financing growth rate".

Second) we may wish to compare a set of inflation data: 1) "2014 ~ 2015", the PPI is the lowest -5.9 & CPI below 2%, the domestic economy is in a "deflationary environment"; 2) 2021.11 The domestic CPI has broken through 2%, considering the recovery of the pig cycle this year, the possibility of breaking through more than 2% in the future is still large, especially the PPI is still at a high level near 10%. Obviously, at this stage, the domestic economy is still in a "stagflation environment", and the superposition of the US monetary tightening cycle will restrict the sustainability of the mainland's "monetary easing", which in turn will affect the transmission effect of the currency cycle on the demand cycle. In this context, once the PPI is observed not to fall but to rise, the risk and magnitude of the A-share adjustment may become more obvious.

Of course, perhaps the central mother has predicted that the domestic economy will shift from "stagflation" to "deflation", then, the transmission of the currency cycle to the demand cycle should be smooth, but it is still necessary to maintain caution and wait for the indicator "after the PPI drops significantly, build a bottom to recover".

In summary, the signs of the central bank returning to the old road of "flood irrigation" were unexpected, and I admit that I "punched the face"; but in terms of the poor credit data structure, M1 decline and other weak credit essence, my prediction has been verified. If the central bank insists on the old road, then it can refer to the situation 1 to 3 in the second path, and will remain cautious for A shares, waiting for the core indicators: "M1 growth rate - short-term growth rate" recovery & "PPI significant decline, bottom up"; and even start to prevent the risk of A shares aggravating the adjustment caused by the PPI rising again. If the policy is "corrected" again, re-refer to path one, remain cautious, and wait for M1 to recover substantially (non-idling). In short, A shares or still not necessarily "bottom time"!

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