There are so many favorable policies released today that it is hard to count them all. What is different from before is that this time there is real money support, and it is no longer just empty talk.
The central bank governor spoke before the market opened, covering four points:
1. Reduce the interest rate of existing mortgage loans by 50BP;
2. The 7-day reverse repo rate was lowered by 20BP; the reserve requirement ratio was lowered by 50BP;
3. Reduce the minimum down payment ratio for second home loans from 25% to 15%;
4. Create new monetary policy tools to support the development of the stock market, create special bonds for stock repurchase and increase, guide banks to provide loans to listed companies and major shareholders, and support the repurchase and increase of stock holdings.
Each of the items is very important. The first one responds to previous market expectations; the second one is that the extent and timing of the interest rate cut slightly exceed expectations; the third one is not mentioned for now; the fourth one is very much beyond expectations, guiding banks to lend to listed companies and major shareholders, supporting buybacks and increased holdings, and large-scale buybacks, which has been one of the core pillars of the long bull market in the U.S. stock market over the past decade.
As the A-share market opened, more news was released:
1. Wu Qing, Chairman of the China Securities Regulatory Commission: Six measures will be issued to promote mergers and acquisitions. The bull market of the ChiNext 10 years ago was essentially a bull market brought about by mergers and acquisitions. Although the growth in performance due to mergers and acquisitions was later disproven, it is undeniable that the bull market was very explosive at the time. Now there are more than 5,000 A-shares, and to be honest, there are too many codes. If mergers and acquisitions can eliminate some codes and make supply-side reforms in the number of codes, it will also be a great benefit.
2. The core tier-one capital of six large commercial banks will be enhanced in phases and batches. It seems to be good for the six major banks, but is it possible to issue additional shares or rights issue to complete the task of enhancing the core tier-one capital? Therefore, short-term rise is normal, but it is better to be cautious in the medium term.
3. Study to allow banks to lend to support qualified enterprises to acquire land from real estate companies in a market-oriented manner, revitalize existing land, and ease the financial pressure on real estate companies. The sharp rise in steel and cement prices is related to this provision, and the market interprets it as an increase in the number of real estate construction starts.
4. The first phase of the swap facility for securities, funds and insurance companies is 500 billion yuan. The funds obtained can only be used to invest in the stock market, and the scale can be expanded in the future depending on the situation. "I told Chairman Wu Qing (of the China Securities Regulatory Commission) that if we do well, we can get another 500 billion yuan in the future, or a third 500 billion yuan." The so-called promotion of long-term funds into the market has finally been implemented. It is no longer an empty talk, and it also gives the expectation of increasing funds in the future. This news is the most important. No matter how much you shout, it is not as practical as real money.
5. Create a stock repurchase and increase loan, and guide commercial banks to provide loans to listed companies and major shareholders for repurchase and increase. The central bank issues re-loans to commercial banks, and the re-loan interest rate is 1.75%. The interest rate for commercial banks to provide loans to customers is 2.25%. The first installment is 300 billion yuan. If the performance is good, additional loans can be made later. It is also real money, which is also very important. The repurchase of many companies in the US stock market is actually a debt repurchase. There is no problem with this operation, but we have to worry about some companies messing around after borrowing money.
6. The central bank buys and sells treasury bonds in the secondary market, and the conditions for injecting base money are gradually maturing. It cracks down on price manipulation in the bond market. The sharp rise in treasury bond prices corresponds to the rise in conservative and pessimistic sentiment in the market. It is inevitable for the central bank to suppress treasury bond prices, otherwise the pessimistic sentiment will be transmitted.
Generally speaking, lowering the reserve requirement ratio, interest rates, and existing mortgage rates are not unexpected measures, but the central bankâs creation of new monetary tools to support the development of the stock market, which means that central bank funds will flow into the stock market, is an unprecedented positive, the first time in history!
The central bank plays the most important role in the modern financial system. The central bank is responsible for formulating and implementing monetary policy, supervising the financial system, maintaining monetary stability, and providing liquidity support. At the beginning of 2016, "there is still room for residents to increase their housing leverage" kicked off a vigorous price increase to reduce inventory; in 2021, those who bet that housing prices will never fall will pay a heavy price, and the real estate bear market will begin.
Today's turn is epic: before, credit funds were not allowed to flow into the stock market; now, credit funds are only allowed to flow into the stock market, and if the effect is good, there will be more periods. When was the last time that institutions could borrow money to buy stocks? It was in 2005. In early 2005, the CSRC communicated with the funds, and the securities companies lent money to the funds to buy stocks. In the end, everyone was happy. In 2005, it was the CSRC that told you to buy stocks, and this time it was the central bank that told you to buy stocks. The central bank is obviously at a higher level because it can pay.
However, the reversal of the economic cycle may not be that easy, so we should wait and see and not act blindly.
