Opinion Leaders | Zhang Yu
Matters
In April 2024, the new social financing was -198.7 billion yuan (previous value 4.87 trillion yuan), and the new RMB loans were 730 billion yuan (previous value 3.09 trillion yuan). The stock of social financing increased by 8.3% year-on-year (previous value 8.7%), M2 increased by 7.2% year-on-year (previous value 8.3%), and M1 increased by -1.4% year-on-year (previous value 1.1%).
Key takeaways
1. The decline in financial data this month is more like the policy authorities taking the initiative to "do surgery and squeeze water", and the structural data of the current financial data is more meaningful than the total data.
2. Combined with the scissors gap of corporate and resident deposits that we observed, there is no further downside risk to the current economy, but the upward elasticity of nominal volume is relatively limited.
3. In terms of policy, when the probability of reducing the reserve requirement and cutting interest rates rises marginally, the probability of exchange rate flexibility increases. There is no conflict between the "squeezing of water" of financial data and the "reduction of interest rates and reserve requirements", and it is necessary to plug the leakage of funds (to curb the idling of funds), so that the interest rate cut and RRR reduction can achieve twice the result with half the effort.
4. The overall trend opportunities of equity assets still need to wait for the clarification of price elasticity; Short-term regulation may be more favorable for the market to outperform the small market under the suppression of capital idling; The focus of bond assets is to pay attention to the statements of the central bank, and it is difficult to accurately judge the short-term bond market, and the volatility increases.
Summary of the report
There are three factors reflected in the current social finance:
1. For the government, the rate of bond issuance is slow; As the main body of the current leverage, the year-on-year stabilization of social finance requires the accelerated issuance of government bonds;
2. For residents, under the situation of the gradual relaxation of the real estate loan and purchase restriction policy since the beginning of the year, residents' willingness to borrow will further decline compared with 2023, which may mean that the current improvement in stimulating residents' borrowing expectations needs to reduce the real interest rate of residents, that is, to promote the year-on-year rise of CPI or housing prices.
3. For enterprises, the current financing reading of non-loans of enterprises is not strong, which may be related to the contraction of net financing of urban investment bonds at the beginning of the year under the background of "real debt reduction", and may also be related to the contraction of liquidity of non-bank institutions in the context of inhibiting funds from "real to virtual".
The current situation reflected by the year-on-year decline in M1 and M2:
1. The supervision of "capital idling" is underway, referring to the previous report "Three Problems for the Ups and Downs of M2", the year-on-year decline in M2 in April was mainly due to the pull-back of M2 derived from the non-loan part to M2 (this part includes banks investing funds in non-bank institutions, or non-bank institutions purchasing bonds or equity issued by banks). Historically, during the period of inhibiting the idling of the financial system, the equity style is more inclined to the large-cap style.
2. The liquidation of tail enterprises is underway, and this month is the first time since 2007 that M1 and corporate deposits have turned negative year-on-year. This may be somewhat similar to a company-wide balance sheet reduction. We understand that under the policy background of [low inflation and low profitability + equipment renewal ≈ supply-side reform], there will inevitably be a process of tail enterprises shrinking their balance sheets and clearing them. If some inefficient enterprises are bound to be liquidated, this kind of liquidation is actually good for the leading enterprises and is the only way for the economy to move towards profit elasticity.
Comprehensive social finance, M2, M1 to understand the current financial situation:
1. The decline in financial data is more like the policy authorities taking the initiative to "do surgery".
(1) Standardize the management of phenomena such as idling of funds and manual interest supplementation. As a result, short-term deposits and loans are crowded.
(2) Since the first quarter of this year, the quarterly accounting of the added value of the financial industry no longer refers to the growth rate of deposits and loans, so the motivation of local governments to increase the added value of the financial industry by supervising deposits and loans has weakened significantly.
(3) The one-sided pursuit of the change in the concept of credit scale has reduced the scale of deposits and loans of inefficient enterprises.
2. How to judge the current economy through financial data?
(1) The significance of the total amount of social finance is declining, and since 2020, the social finance has been high and the M2 has been high, which does not mean that the economy has risen significantly; Now, there is no need to be suddenly pessimistic about the economy.
(2) The observation structure data is more meaningful, we have been tracking the scissors difference of corporate and residential deposits in the past six months, and the central bank also pointed out this logic in the report on the monetary policy yesterday, the central bank said that "due to the need for recovery of household consumption and insufficient aggregate demand, deposits are mainly retained in the residential sector, and there is no further conversion into corporate deposits through the expenditure of the residential sector." "The follow-up trend repair of the economy still needs to observe the transfer of residents' deposits to enterprises and the rebound of M1, and the trend of the two indicators is still not visible. Therefore, the short-term economy may still be at the bottom, and the price elasticity will not be recognized for the time being.
3. What is the view of the follow-up monetary policy?
Referring to our previous report "Playing Empty, Waiting for the RRR Cut, Looking at the Interest Rate Cut", when the probability of the RRR rate cut rises marginally, the probability of exchange rate elasticity increases. In terms of timing, interest rate cuts may be triggered when overseas monetary policy is expected to turn dovish and external exchange rate fluctuations increase, and RRR cuts may be triggered during the accelerated issuance of government bonds. There is no conflict between the "squeezing of water" of financial data and the "reduction of interest rates and reserve requirements", and it is necessary to plug the leakage of funds (to curb the idling of funds), so that the interest rate cut and RRR reduction can achieve twice the result with half the effort.
4. How do you view the capital market?
For equity assets, price elasticity still needs to be waited. At present, there is no further downside risk to the economy, but the upside elasticity of nominal volume is limited, which can support the basic activity of the capital market, but it also faces the possibility of increased volatility. Trend opportunities require positive price elasticity (i.e., the establishment of a positive year-on-year trend in PPI), and we recommend observing four leading indicators – the scissors spread of corporate household deposits, M1, PMI, and coal prices. It has not yet been identified. However, at the style level, strong financial supervision will inevitably correspond to the reduction of real to virtual funds in the market, so a more likely reflection is that the equity market outperforms the small market (12~15 years, 21~23 years, during the period when the funds are idling, the small market outperforms the large market, and 17~20 When the last round of strong financial supervision, the large market outperformed the small market, which is the same)
For bond assets: focus on the fourth column of the report "How to look at the current long-term treasury bond yield" The central bank's characterization of the recent bond market adjustment: "The yield on 30-year treasury bonds to maturity has risen to more than 2.5% at the end of April, and the marginal improvement of the relationship between supply and demand in the bond market" "The intensity of the active fiscal policy this year is relatively large, and the scale of government bonds planned to be issued is not small, and the pace of issuance will be accelerated." Bond market supply and demand are expected to be [further] more equilibrium." Therefore, combined with the central bank's statement + the prediction of the liberalization of exchange rate flexibility + economic price elasticity has not yet appeared, it is difficult for the short-term bond market to accurately judge, and the volatility increases.
Risk warning: monetary policy exceeds expectations
Table of Contents of Reports
The main body of the report
1. Reasons for the weak social finance data
In April, social finance increased by -198.7 billion yuan in a single month, which was the first negative under the new caliber since 2008, a year-on-year decrease of 1.4 trillion yuan.
From the perspective of absolute value splitting, compared with the same period in history, only corporate loans were stronger in April, and the rest of the financing was significantly weaker than the historical one, among which the four subjects of residential loans, new undiscounted bank acceptance bills, corporate bonds, and government bonds fell more obviously than the historical ones.
From the perspective of year-on-year increment, the year-on-year growth of government bonds in April fell further compared with the first quarter, the year-on-year growth of household loans was basically the same as that in the third quarter, and the year-on-year growth of corporate loans even rose slightly. The rest of the year-on-year was generally fluctuating and volatile.
To sum up, the negative social finance data in April reflects three sets of information:
(1) For the government, the rate of bond issuance is slow; As the main body of the current leverage, the year-on-year stabilization of social finance requires the accelerated issuance of government bonds;
(2) For residents, under the situation of the gradual relaxation of the real estate loan and purchase restriction policy since the beginning of the year, residents' willingness to borrow will further decline compared with 2023, which may mean that the current improvement of residents' borrowing expectations needs to reduce the real interest rate of residents, that is, to promote the year-on-year rise of CPI or housing prices.
(3) For enterprises, the current financing reading of non-loans of enterprises is not strong, which may be related to the contraction of net financing of urban investment bonds at the beginning of the year in the context of "real debt reduction", and may also be related to the contraction of liquidity of non-bank institutions in the context of inhibiting the "real to virtual" of funds.
2. Reasons for the year-on-year decline of M2 and M1
M2 in April was 7.2% year-on-year, down 1.1 year-on-year from M2 in March, and M1 was -1.4% year-on-year, which was the first year-on-year negative except for the Chinese New Year period.
As far as the judgment of M2 is concerned, referring to the previous report "Three Problems for the Ups and Downs of M2", since the central bank has not yet announced the balance sheets of other depository companies, we have no way to make a fine split of the decline of M2 in April, and can only observe it from the perspective of loan derivation and non-loan derivation. The year-on-year decline in M2 in April was mainly due to the accelerated decline of M2 from non-loan derived M2. M2 derived from non-loans mainly consists of banks investing funds into non-bank institutions, or non-bank institutions purchasing bonds issued by banks. This may reflect the ongoing regulatory efforts to regulate "idling funds". Historically, the equity style is more inclined to the large-market style.
As far as M1 judgment is concerned, it is worth noting that this is the first time since 2007 that M1 and corporate deposits have turned negative year-on-year. This may be somewhat similar to a company-wide balance sheet reduction. Combined with the statement of the first column of the central bank's monetary policy implementation report "The Relationship between Credit Growth and High-quality Economic Development": "When the loan exceeds the real and effective financing needs of the real economy, it will not only make inefficient enterprises occupy credit resources for a long time, it will be difficult to clear and survive the fittest, and low-price vicious competition will drag down high-efficiency enterprises, but also easily cause some enterprises to use low-cost loan funds for purchasing wealth management, saving fixed terms, or relending to other enterprises with their own advantageous position, bringing about the problem of idling arbitrage of enterprise funds." ”
We understand that under the policy background of [low inflation and low profitability + equipment renewal ≈ supply-side reform], there will inevitably be a process of tail enterprises shrinking their balance sheets and clearing them. If some inefficient enterprises are bound to be liquidated, this kind of liquidation is actually good for the leading enterprises and is the only way for the economy to move towards profit elasticity.
3. How to understand the current economic situation of integrated social finance, M2 and M1?
(1) The decline in financial data is more like the policy authorities taking the initiative to "do surgery"
Based on the above discussion, we believe that there are three main reasons for the decline in financial data:
(1) Standardize the management of phenomena such as idling of funds and manual interest compensation. Since April, the regulators have strengthened the regulation of the phenomenon of "low loans and high deposits" idling arbitrage and manual interest supplementation by banks, and a considerable number of inflated and irregular deposits and loans in the past have decreased, thus causing the crowding effect of short-term deposit and loan data.
(2) Changes in GDP accounting in the financial industry affect local behavior. In the past, the quarterly accounting method of added value of the financial industry referred to the growth rate of deposits and loans, but since the first quarter of this year, the National Bureau of Statistics has revised it to refer to the indicators of net interest income, net fee and commission income, which can more objectively reflect the contribution of the financial industry to the real economy and is more in line with the annual accounting data. After the change of statistical methods, the motivation of local governments to increase the added value of the financial industry by supervising deposits and loans has weakened significantly, which may explain the weakness of some deposits and loans.
(3) The one-sided pursuit of a change in the thinking of credit scale. The credit scale of enterprises that have reduced efficiency and occupied credit resources for a long time has an impact on the scale of deposits and loans.
(2) How to judge the current economy through financial data?
At present, the observation significance of aggregate financial data is declining, especially the change in the increment of social financing does not necessarily correspond to economic changes. Before 2020, the increase in social finance was roughly synchronized with the increase in PMI, so whether social finance rose or not essentially corresponds to the strength of the economy. However, after 2020, changes in social finance and economic growth expectations seem to be "decoupled". A strong social finance no longer means a strong economy, and a weak social finance does not necessarily indicate a weak economy.
We believe that we should pay more attention to structural data, we have continued to remind enterprises in the past six months that the scissors difference between corporate and resident deposits is an important leading indicator of the economy, the central bank in the second column of the report on the policy of goods "from the distribution of deposits and loans structure to see the flow of funds" also talked about this law: "However, due to the need for the recovery of household consumption and the lack of aggregate demand, deposits are mainly retained in the residential sector, and there is no further conversion into corporate deposits through the expenditure of the residential sector." "From this point of view, the elasticity of the current positive price repair still needs to wait.
(3) How to observe the follow-up asset allocation?
For equity assets, price elasticity still needs to be waited. At present, there is no further downside risk to the economy, but the upside elasticity of nominal volume is limited, which can support the basic activity of the capital market, but it also faces the possibility of increased volatility. Trend opportunities require positive price elasticity (i.e., the establishment of a positive year-on-year trend in PPI), and we recommend observing four leading indicators – the scissors spread of corporate household deposits, M1, PMI, and coal prices. It has not yet been identified. However, at the style level, strong financial supervision will inevitably correspond to the reduction of real to virtual funds in the market, so a more likely reflection is that the equity market outperforms the small market (12~15 years, 21~23 years, during the period when the funds are idling, the small market outperforms the large market, and 17~20 When the last round of strong financial supervision, the large market outperformed the small market, which is the same)
For bond assets, focus on the fourth column of the goods policy report "How to look at the current long-term treasury bond yield" The central bank's characterization of the recent bond market adjustment: "The yield on 30-year treasury bonds has risen to more than 2.5% at the end of April, and the marginal improvement in the relationship between supply and demand in the bond market" "The intensity of the active fiscal policy this year is relatively large, and the scale of government bonds planned to be issued is not small, and the pace of issuance will be accelerated." Bond market supply and demand are expected to be [further] more equilibrium." Therefore, combined with the central bank's statement + prediction of exchange rate elasticity + economic price elasticity has not yet appeared, it is difficult for the short-term bond market to accurately judge, and the volatility increases.
4. Comments on financial data in April: the monthly increment of social finance turned negative
(1) Credit: Residents' credit is weak
In April, RMB loans increased by 730 billion yuan, an increase of 11.2 billion yuan year-on-year. The balance of RMB loans at the end of the month was 247.78 trillion yuan, a year-on-year increase of 9.6%, unchanged from the previous month.
In terms of details, resident loans decreased by 516.6 billion yuan, of which short-term loans decreased by 351.8 billion yuan, a year-on-year decrease of 226.3 billion yuan, and medium and long-term loans decreased by 166.6 billion yuan, a year-on-year decrease of 51 billion yuan; Loans to enterprises (institutions) increased by 860 billion yuan, of which short-term loans decreased by 410 billion yuan, a year-on-year decrease of 300.1 billion yuan, medium and long-term loans increased by 410 billion yuan, a year-on-year decrease of 256.9 billion yuan, and bill financing increased by 838.1 billion yuan, an increase of 710.1 billion yuan year-on-year.
(2) Social finance: The monthly growth of social finance turned negative
In April, the new social finance was -198.7 billion yuan, a year-on-year decrease of 1.4 trillion yuan, and the stock was 8.3% year-on-year, down 0.4 percentage points from the previous month.
In terms of detailed data, RMB loans to entities increased by 299.6 billion yuan, a year-on-year decrease of 111.6 billion yuan; undiscounted bank acceptance bills decreased by 448.6 billion yuan, a year-on-year decrease of 314.1 billion yuan; entrusted loans increased by 9 billion yuan, an increase of 700 million yuan year-on-year; trust loans increased by 14.2 billion yuan, an increase of 2.3 billion yuan year-on-year; the net financing of corporate bonds was 49.3 billion yuan, a year-on-year decrease of 244.7 billion yuan; The net financing of government bonds was -98.4 billion yuan, a year-on-year decrease of 553.2 billion yuan, and the domestic stock financing of non-financial enterprises was 18.6 billion yuan, a year-on-year decrease of 80.7 billion yuan.
(3) Deposits: Deposits in the real sector fell
M2 in April was 7.2% year-on-year, and the growth rate fell by 1.1% from the end of the previous month; M1 grew by -1.4% year-on-year, down 2.5% from the previous month.
In April, RMB deposits decreased by 3,920 billion yuan, a year-on-year decrease of 3,459.1 billion yuan. The balance of RMB deposits at the end of the month was 291.59 trillion yuan, a year-on-year increase of 6.6%.
Specifically, household deposits decreased by 1.85 trillion yuan, a year-on-year decrease of 650 billion yuan. The deposits of non-financial enterprises decreased by 1,872.5 billion yuan, a year-on-year decrease of 1,731.7 billion yuan, the financial deposits increased by 98.1 billion yuan, a year-on-year decrease of 404.7 billion yuan, and the deposits of non-banking financial institutions decreased by 330 billion yuan, a year-on-year decrease of 621.2 billion yuan.
For details, please refer to the report released by Huachuang Securities Research Institute on May 12 "[Huachuang Macro] Financial Data "Squeezing Water", Research and Judgment Must "Thin the Total" - April Financial Data Comments".
Source: Opinion Leaders