Expected warming of the standard reduction

Under the background of the expected warming of the reserve requirement reduction, the leading shares of banks fell sharply, making investors unprepared. Why on earth?

Industry insiders believe that some leading joint-stock banks have risen too much in the past year or so, which has the pressure of profit taking and cash back. The expected reduction of reserve requirement makes the market worried about the slowdown of economic growth in the third quarter; Historical experience shows that in the process of A-share unilateral decline in 2018, there is a time difference of about two weeks between the date when the possible RRR reduction was proposed twice and the date when the financial shares bottomed out.

The executive meeting of the State Council recently decided to increase financial support for the real economy and introduce measures to support carbon emission reduction. The meeting also pointed out that timely use of such monetary policy tools as reserve rate reduction should further strengthen financial support for the real economy, especially for small, medium and micro enterprises, so as to promote the steady decrease of comprehensive financing cost.

This is the first time since 2021 that the high-level authorities have released a signal to lower the standard.

Gao Ruidong, an analyst at Everbright Securities, said that the reason why the executive meeting of the State Council released the signal of reducing the reserve requirement at this time was mainly due to two considerations: on the one hand, the commodity prices continued to rise, constantly impacting the profit recovery of the midstream manufacturing industry and the downstream consumer goods industry, and reducing the reserve requirement could lead the comprehensive financing cost of the real economy down, Then, the downward financing cost is used to hedge the upward raw material cost, which helps the profit recovery of the middle and lower reaches of enterprises; In addition, the economic growth in the second quarter is expected to form the top area of the whole year, and the subsequent economic growth is likely to slow down.

However, on the morning of July 8, banking stocks showed a significant decline. Among them, the leading stock China Merchants Bank (600036. SH) fell 5.82% to close at 50.32 yuan, while Ping An Bank (00000 1. SZ) and Bank of Ningbo (002142. SZ) fell 5.37% and 5.04% respectively. In 2020, the performance of the above three banks is significantly better than that of other bank stocks, and the trend of bank stocks shows obvious differentiation.

As for bank stocks, Hu Yu, partner and research director of Shenzhen Chengnuo Asset Management Co., Ltd., told China first finance and economics that the expected reduction of RRR may come from easing the downward pressure of real economy growth in the third quarter. In the second half of the year, it may be difficult for the economy to exceed expectations. Some of the core assets that have increased too much are still overvalued. The leading joint-stock banks have increased a lot in the past, but now they still need to digest the market profit.

Lin Jiayi, CEO of Xuanjia finance, believes that due to the impact of the epidemic in 2020, the policy requires banks to yield profits, and the targeted reduction of reserve requirements is also a pressure on banks themselves, so the double superposition leads to a sharp drop in bank stocks. However, it should be clear that some bank stocks have gone through a good rally before, and the valuation is not low. For example, the price to book ratio valuation of China Merchants Bank was once at the historical high in the past decade.

Wen Tianna, non-executive chairman of broad financial holdings, believes that the regulatory authorities should strike a balance between liquidity tension and affluence, because they mainly focus on small and medium-sized enterprises and do not expect this part of the released liquidity to enter the capital market. From the perspective of the real economy, it will still take some time for these liquidity measures to be reflected in the real economy.

Looking back at the historical trend in the past, in the process of market decline in 2018, there was a time lag of about two weeks from proposing a possible RRR reduction to the bottom of financial stocks.

On June 20, 2018, the Standing Committee of the State Council proposed to “support banks to develop the market of small and micro enterprises, and use targeted reserve requirement reduction and other monetary policy tools”, and then most bank stocks bottomed out on July 3; On December 24, 2018, the national Standing Committee proposed to “improve the targeted RRR reduction policy of Inclusive Finance”, and then the market bottomed out on January 4, 2019.