Monarch macro: the government may take six major measures

[Monarch Macro]Under the new “three big mountains”, the economic hope and the possibility of “stock and debt double bulls”-Macro Weekly (20190602) Source: Macro Changchun Introduction The economy is suffering from three new long-term trends: (1) long-term structuralContradictions, (2) rapid population aging and (3) excessive leverage.

Under the keynote of “doing your own thing,” the government may take six major measures to respond.

These measures are conducive to strengthening our confidence in the economy and markets, and it is not impossible for stocks and bonds to be a bull.

  Summary this week’s view: Under the new “three big mountains” of the economy, the possibility of “stock bulls and bulls” in the capital market?

  Focus of the week: How do you look at the contractor event?

  Domestic economy: High-frequency data shows that the five-month construction season has continued, and the connection between demand and supply has improved.

  1) Downstream: The growth rate of real estate sales has narrowed, and the growth rate of land supply and transactions has dropped on average; 2) Midstream: The blast furnace operating rate has continued to rise, the growth rate of coal consumption for power generation has fallen, cement prices have risen, thermal coal prices have fallen, and rebar prices have risen slightlyInventory growth rate narrowed slightly; 3) Upstream: crude oil prices, copper prices fell slightly, iron ore prices continued to rise; 4) food prices: vegetable prices fell slightly, pork prices continued to rise; 5) currency: money market interest rates somewhatThe improvement declined, and the RMB exchange rate rose slightly.

  Large-scale global assets: Most of the global equity markets have declined, the bond market is basically stable, and commodities have gone up and down.

  Next week’s attention: China ‘s foreign exchange reserves in May, China ‘s Caixin PMI in May; President Xi Jinping is about to pay a state visit to Russia from June 5-7.
Focus of the week: Under the new “three big mountains”, the possibility of “double bulls in stocks and bonds”?

  The recent game of great powers has become the world’s largest uncertainty, and its adverse impact on the economy has become increasingly apparent.

At the same time, the disposal of the Baoshang Bank caused the reaction of the money market and the bond market, and the credit risk of the (City Commercial Bank) is making a comeback.

For a while, the market risk appetite dropped significantly, and some investors were considering “cash is king.”

  Of course, everyone has less pessimistic investors.

Although some domestic investors are worried about various uncertainties, they are very gratified at the policy direction and believe that the logic of the overall bull market has not been completely destroyed.

At the same time, most overseas investors are still optimistic about Chinese assets, although they have lightened their positions early due to the estimated rapid recovery.

  In fact, in terms of long-term trends, the Chinese economy faces three major long-term challenges-temporarily called the new “three big mountains”-namely (1) long-term structural contradictions, (2) a rapidly aging population and (3) too highLeverage.
These three major issues are intertwined and put different pressures on the economy at different stages.

The key to the subsequent market switch from “cash is king” to “stock-debt double bull” is how current policies respond to this new “three big mountains.”

  First, the reduction of long-term games among big countries is reshaping the global industrial chain, which will bring long-term pressure on long-term manufacturing investment and employment.

We should pay more attention to how this affects the position of hypertension in the global value chain and industry chain.

And most of the companies in China-both Chinese and foreign-are interested in relocating the industrial chain, especially those that need to export to the United States.

Obviously, previous foreign direct investment is rising, which has a lot to do with this trend.

  Second, the aging of long-term population is accelerating, real estate investment demand, and potential long-term meetings are gradually changing.

Population aging will affect long-term economic growth through channels such as capital-input ratio and demographic dividend.

In addition, the 20-50 year-old population will accelerate its decline in 2019-26 each year, with an average annual decline of 10 million people (see the report “The era of population” deflation “is beginning), 2018/12/26).

These have caused the average real estate investment demand to show a downward trend.

  Third, it has previously accumulated a high leverage ratio during the period of rapid growth, and has room for follow-up policies and investment needs.

The hidden debts that have been widely criticized, shadow banking issues, city commercial banks’ leverage ratio, and security have been unprecedentedly realized by the takeover of Baoshang Bank.

In 2018, the government strengthened the supervision of shadow banking and opened financial deleveraging, but it created the risk of dealing with the risks, which had a great impact on the economy and eventually led the central 杭州桑拿体验网 government to readjust the relationship between finance and the economy.

The Baoshang Bank incident shows that the government is in a dilemma. If it is just redeemed, it will further increase moral hazard; if it is breached, the city commercial banks as a whole may be squeezed by credit, which may lead to systemic risks.

At present, in the disposal of Baoshang Bank, 100% of the principal and interest of individual customers and customers of public and peer institutions of 5000 million and below are fully guaranteed.

For the principal and interest of the same large debtor with more than 50 million yuan, the principal and interest are protected in advance according to the net debt, and the average protection ratio is expected to be about 90%. The absence of full payment also represents the intention of the supervisory layer to break through the “just cashed”;, Actively released liquidity, and rarely performed reverse repurchase operations at the end of the month, with 80 billion and 150 billion 7-day reverse repurchase operations on May 27 and May 28, respectively.

After all, whether it will bring similar problems to 2018, the market is still in fermentation, and the subsequent uncertainty is still very large.

  Of these three long-term problems, it is easy to observe that one result is that long-term long-term investment demand (real estate investment, manufacturing investment) will weaken, or hover low for a long time.

Another consequence is that the long-term growth of developing countries’ economies will inevitably decline.

Therefore, the long-term interest rate center is expected to continue to approach zero.

  Regarding these long-term problems, the central government’s response is remarkable, and the pressure to relieve pressure through reforms is not impossible.
These problems facing China are actually very similar to those that Japan faced in the 1980s and 1990s, and China has a larger market depth than Japan. It should be possible to avoid Japan’s “lost twenty years”.
Relatively limited measures, we think at least include the following: (1) The long-term economic and social obviously has strategic tolerance, which is difficult for the United States to compare. In the short term, the counterattack of “one city and one pool” is not considered. In the long run, it is invincible.(2) Learn from Japan ‘s measures to resolve the US ‘s long-term strategic pressure, and upgrade the domestic industrial chain (which can increase the strength of government procurement and industry guidance funds), and actively help companies to deploy the global industrial chain; (3) Open up to respond to “”Popularism”, increase opening to the outside world, especially Europe, Japan and other countries, in order to prevent developed economies from forming consistent pressure on themselves; (4) accelerate the reform of state-owned enterprises and financial supply-side reforms, and strive to improve corporate efficiency and capital market financing functions, especiallyIt is financing for innovation momentum, conversion of old and new kinetic energy; (5) Proper and steady improvement of hedging policy, the key lies in boosting consumption and infrastructure to supplement weaknesses, supporting new economic consumption and accelerating construction of infrastructure; (6) Financial stability must prevent debt scaleFor growth, we must guard against premature and deleveraging too quickly. At present, it is advisable to focus on “stabilizing leverage”.

  These measures are in line with the central government’s direction of “doing its own thing” repeatedly, and will definitely enhance domestic and foreign investors’ confidence in the Chinese economy and Chinese assets.

Well, unless faced with this new “three big mountains”, it will not be impossible for stocks and debts to double.

  2.
Focus of the week: The Baoshang Bank incident was taken over by the CBRC due to severe credit risk.

On May 24, 2019, due to the severe credit risk of the Baoshang Bank, the CBRC decided to implement the takeover of the Baoshang Bank from now on for a period of one year.

From the day when the takeover took place, the takeover group fully exercised the management and management rights of the contractor bank and entrusted the construction bank to custodian the contractor’s banking business.

In addition, the newly established deposit insurance fund will provide protection for the drafts accepted by the contractor bank before the end of business on May 24.

As of mid-2017, the total assets of Baoshang Bank were 564.6 billion, of which 175.8 billion were loans and 220.4 billion were deposits.

The major shareholder of Baoshang Bank is Tomorrow Group. The group holds a total of 89% of the equity of Baoshang Bank. Due to the large amount of funds of Baoshang Bank being illegally and illegally occupied by the major shareholders, it is overdue and difficult to return for a long period of time.The credit crisis triggered the official takeover conditions to be taken over according to law.

  Baoshang Bank has exposed some problems in 2017.

In October 2017, Dagong International adjusted the rating outlook of Baoshang Bank as a substitute.

The reasons are as follows: 1) The reserve fund was accrued at the end of June 2017, and the core tier 1 capital of Baoshang Bank was accumulated.

33% do not meet regulatory requirements.

  2) Since 2017, the scale of non-performing loans of Baoshang Bank has continued to increase.

As of 2016, loans in Inner Mongolia accounted for more than 80%, and the growth of economic growth in Inner Mongolia has led to tightness in liquidity for some enterprises, leading to bad debt provision by banks.

  3) Since 2017, the investment scale of Baoshang Bank’s receivables is still at a relatively high level; its reliance on interbank funds is relatively high.

According to Dagong International, at the end of the first quarter of 2017, the contractor’s bank division was as high as 192%, and the provision coverage ratio was 171%.

  ”Ex-ante supervision” indicates that the supervisors have proactively guided local banks to release risks.

Unlike the Air Force case, the Baoshang Bank was proactively “pre-supervised” by the supervisory authorities before the redemption crisis occurred.

As the ability to collect and store is not strong and the quality of accumulated capital from previous years is not sufficient, the major funds of small commercial banks are interbank funds.

Once liquidity risks occur in small commercial banks, the risk will be transferred to large commercial banks through interbank certificates of deposit. The news will also cause panic in the interbank market, leading to a chain reaction.

In the disposal of the Baoshang Bank, 100% of the principal and interest of individual customers and customers of public and interbank institutions under 50 million yuan and below were fully guaranteed. For the principal and interest of the same large amount of creditors above 50 million yuan,The net amount is guaranteed in advance, and the average protection ratio is expected to be about 90%. The failure to fully pay off the debt also represents the intention of the supervisory layer to break through some of the “just cashed out”, reducing the probability of future financial systemic risks and concurrent deposit certificates.

The interest rate consensus inter-bank certificate market has grown rapidly. As of April 2019, the bond market inter-bank certificate of deposit custody balance.

9 trillion yuan, an annual increase of 14%.

The initial initiative to take risks and release excessive liquidity demonstrates the decision to implement financial supply-side reforms.

  Initially proactively release liquidity and establish a stable environment for deepening reform and opening up of the financial industry.

Affected by the Baoshang Bank incident, market liquidity was slightly tight, and money market interest rates and bond market yields increased.

Therefore, reverse repurchase operations were rarely performed at the end of the month for a long time, and the seven-day reverse repurchase operations of 80 billion and 150 billion US dollars on May 27 and May 28, respectively, actively released liquidity to the market.

In addition, on May 30th, Yi Gang pointed out that it will release 300 billion yuan three times on June 17, July 17, so that 1,000 county-level rural commercial banks can use incremental funds to raise loans for small and micro enterprises.

Regulators actively respond to and resolve risks, continue to deepen the reform and opening up of the financial industry, solve the problem of credit support and direct financing of private enterprises and small and micro enterprises, support the stable growth of manufacturing investment, and stimulate the actual release of energy within the economy.

  3.Domestic economy: High-frequency data shows that the continuous start of the five-month peak season, the demand side and the supply side have improved continuously3.

1.Downstream: The growth rate of real estate sales has narrowed, and the growth rate of land supply and transactions has declined. The growth rate of real estate sales has narrowed since May 2019.

The transaction area of commercial housing in 30 large and medium-sized cities increased by 13 in ten years.

59%, down about 7 from April.

78 averages.

Among them, the growth rate of first-tier cities dropped 41 earlier than in April.

62 good 14.

43%, second-tier cities rose by 5.
08 perfect to 13.

35%, the previous growth rate of third-tier cities has dropped by 13 from the previous month.
55 good to 13.

42%.

  In May, the supply of land in various tier cities and the transaction situation were differentiated. The overall supply area increased upward, and the transaction area continued to decline.

Data from 100 large and medium-sized cities show that the annual growth rate of land supply area in May increased slightly by 15 compared to April.

55 perfect to 6.

66%, the transaction area exceeded the growth rate and narrowed slightly by 1 to -5.

48%.

Among them, the land supply area in first- and second-tier cities narrowed above the growth rate, and the land supply area in third-tier cities continued to extend beyond the growth rate, but the decline was narrowed.

In terms of transactions, the transaction area of first- and second-tier cities continued to increase beyond the growth rate, and the transaction area of third-tier cities continued to decline, but the decline was narrowed.

  3.

2.Midstream: Blast furnace operating rate continues to rise, power generation coal consumption growth rate has fallen, cement prices have risen, thermal coal prices have fallen, rebar prices have risen slightly, and inventory growth has narrowed slightly. For five months, the blast furnace operating rate has continued to rise and average daily coal consumptionThe growth rate has decreased.

As of the week of May 31, the blast furnace started to reset 71.

69%, continuing the upward trend.

The average monthly coal consumption growth rate has dropped, and the average daily coal consumption of the six major power generation groups has fallen by 18 since May.

9%, an increase of about 13 from the previous month.

58 averages.

  Cement prices rose and thermal coal prices fell slightly.

As of May 31, the cement price index in May increased by about 0 from the previous month in April.

88 averages to 150.

25. The year-on-year growth rate decreased by about 4 subdivisions to 5 compared with April.

55%.

The growth rate of thermal coal prices was -1.

56% to close at 610.

29 yuan / ton, the previous growth rate decreased by about 9 substitutes to -2.

20%.

  Rebar prices continued to rise slightly, and inventory growth narrowed slightly.

Since May, rebar prices have continued to increase slightly, with a month-on-month growth rate of zero.

09% to close at 4202.

81 yuan / ton, the previous growth rate fell by 4.

5 perfect to 1.

74%.

Rebar inventory narrowed slightly to -19.

04%, the annual growth rate narrowed to -5.

16%.

  3.

3.Upstream: crude oil prices, copper prices fell slightly, iron ore prices have continued to rise for 5 months, crude oil prices have fallen slightly.

As of June 1, the spot price of British Brent crude was 68.

22 US dollars / barrel, down 5 from the previous month in April.
At 99%, WTI spot crude oil prices were down 11 from the previous month.

45% to 56.
$ 6 / barrel.

  Iron ore prices continued to rise and copper prices fell.

Since May, iron ore futures prices have risen 8% from May.

45% is 696.

25 yuan / ton, the previous growth rate continued to rise by about 6 substitutes to 48.

25%.

Halogen copper futures closed at 47402.

5 yuan / ton, down 3 from the previous month in April.

84%, a slight decline in one year4.

2 excellent to -7.

62%.

  3.

4.Food prices: Vegetable prices have fallen slightly, pork prices have continued to rise Since May 2019, vegetable prices have fallen and pork prices have continued to rise.

As of June 1, the average price of 28 key monitored vegetables was 3.

94 yuan / kg, down 8 from April.

64%.

The average pork price in 22 provinces and cities is 20.

45 yuan / kg, an increase of 1 from the previous month.

43%, up 28 each year.

87%.

  3.

4.Currency: Money market interest rates have declined, and the RMB exchange rate has risen slightly. In terms of interest rates, money market interest rates have declined.

As of May 31, R007 was down 15 from the end of April.

2bp to 2.

5885%, R001 increased by 64 from the end of April.

7bp to 2.

2293%.

Among them, the one-year Treasury bond rate was basically the same as at the end of April, which was 2.

At 6790%, the 10-year Treasury bond rate fell by 11bp to 3.

2751%.

Credit debt interest rates have fallen.

The 3-year and 1-year yields of AAA medium- and short-term notes were 17bp and 8bp to 3 at the end of April, respectively.

7815% and 3.

In terms of exchange rate, the offshore RMB spot exchange rate is 63.15%.

9369, an increase of 19 from the end of April.

9bp.

  4.Large-scale global assets: The global equity market has decreased, the debt market is basically stable, and commodities have risen and fallen. In general, the performance of large-scale assets this week has been poor, the global stock market has fallen overall, and commodities have risen and fallen.
Specifically, European stock markets fell across the board except the UK and Italy. The FTSE 100 (UK), exchange DAX index, Paris CAC40 index, Italian ITLMS index and Russian RTS index increased by 0.
69%, -2.

37%, -2.
05%, -2.

66%, 0.

62%.

This week, the Dow Jones Industrial Average, the S & P 500 Index, and the Nasdaq Composite Index respectively recorded -3.

01%, -2.

81% and -2.

41%.

Domestically, the stock index has grown overall, and the Shanghai Composite Index has increased by 1.

60% to 2898.

70, GEM rose 2.

76% to 1483.

66.

  The dollar index rose, and domestic bond yields generally rose.

The US dollar index remained at 0 on Friday (May 31).

The drop of 4% hovered around 97 as a whole.

Near 78, investors’ risk aversion and overnight US consumer confidence index provided the US dollar with a high level of momentum to keep up, rising for four consecutive months; the dollar fell against the yen.

20% reported 108.

30, the lowest since January 15.

The domestic bond market yields have generally increased during the week, and the one-year bond issuer’s maturity yield has increased.

47bp.

  Commodities were mixed.

Affected by the slight weakening of steel demand, DCE coke fell the most this week, falling by -7.

78%; oil prices have fallen slightly, NYMEX crude oil, IPE cloth oil and other weekly declines were -4.

42%, -4.

12%; CBOT corn, CBOT soybeans and Baltic Dry Bulk Index (BDI) increased by 8 this week.

05%, 7.

09% and 2.

81%.

  5.International policy: Announcing in advance that the GSP replacement of India will cease. On May 31, the United States President terminated the signing of an executive order to remove India from the list of GSP budget countries.

The executive order came into effect on June 5.

GSP stands for Universal Preference System.

On March 4 this year, it was previously stated that the United States intends to cancel the GSP replacement for India because India can ensure fair and reasonable market access conditions to the United States.

Once the order comes into effect, at least US $ 5.6 billion of Indian exports no longer qualify for duty-free fees, according to data in a report released by the US Congress in January.

  US Federal Reserve: announced the bond purchase plan after the end of the scale-down plan. From October, the US Federal Reserve will re-invest institutional bonds and MBS principals into 11 types of US Treasuries through the secondary market.20 billion US dollars a month, more than the amount will be reinvested into the institution MBS.

In March this year, the FOMC voting committee unanimously agreed to end the post-financial contraction reduction policy by the end of September.

The Fed’s plan states that the initial reinvestment of Treasury bonds will generally be in line with the duration portfolio held by existing Treasury bonds, and the distribution of principals due to institutional debt will be carried out in 11 different types of Treasury bonds, including nominal interest rate bonds), Short-term T-bills within one year, inflation-protected bonds (TIPS), floating-rate medium-term Treasury notes (T-notes), etc.

Regarding the longer-term composition of the Fed’s balance sheet, the FOMC will continue to reinvest in the future.

  4) Canadian budget: keep interest rate at 1.
75% unchanged Canadian short-term interest rates remain at 1.

75% unchanged, in line with market expectations.
Canada extended its interest rate unchanged for the fifth consecutive month, and continued to signal that it did not see the need to adjust borrowing costs in the short term, and even expressed its growing confidence that the economy is rebounding.

Ottawa policymakers said in a quota decision on Wednesday that recent data “strengthened” their view that the economic conditions at the end of 2018 and early 2019 are temporary.

In this context, the degree of easing provided by current policy rates is still appropriate.

The statement redefines and will gradually continue to rely on data to closely monitor household spending, oil markets and global developments.

  Pan Gongsheng, Deputy Governor of the People ‘s Bank of China: Increasing policy support for small and medium-sized banks On May 31, Pan Gongsheng, Vice President of the People ‘s Bank of China, said at the forum that since the beginning of this year, the macroeconomic operation has been stable and the main macroeconomic indicators have remained within a reasonable range.Accelerated conversion and sustained and sustained economic growth are a good basis for the healthy development of the conventional banking industry.

Pan Gongsheng said that small and medium banks are the main force serving small, medium and micro enterprises and inclusive finance, and supporting the healthy development of small and medium banks is an important part of the structural reform of the financial supply side of Greece.

The central government has issued a number of supporting policies and will continue to increase support.

The People’s Bank of China will comprehensively use a variety of monetary policy tools to maintain reasonable and sufficient liquidity in the banking system, continue to implement deposit reserve ratios for small and medium-sized banks, expand the size of tools such as reloans and discounts, and encourage the issuance of small and medium-sized financial bonds and capital supplements.Bonds to further enhance the ability of small and medium banks to serve small, medium and micro enterprises.

  4) Release: release 300 billion incremental funds for the issuance of small and micro by rural commercial banks. On May 30, Yi Gang, China’s transfer president, pointed out at the 2019 Financial Street Forum Annual Meeting that the credit of private enterprises and small and micro enterprises should be well resolved.Support and direct financing issues.

In promoting private and small and micro enterprises to solve financing difficulties, expensive financing, and lower financing costs, the People’s Bank of China will implement inclusive financial targeted reductions. Next, it will release three billion yuan on June 17, July 17, and release 300 billion yuan.Therefore, for 1,000 years, county-level rural commercial banks can use incremental funds to issue small and micro enterprise loans.

In the next step, the People’s Bank of China will actively cooperate with relevant departments and make joint efforts to ensure that this year, the balance of small and micro enterprise loans of large banks will increase by more than 30%, and the comprehensive financing cost of small and micro enterprises will be reduced by one goal.

The next session of the People’s Bank of China will continue to deepen the reform and opening up of the financial industry, support policy pilots for capital account facilitation, and cross-border RMB payment and settlement policies in Beijing.

  5) China International Capital Exchange: Issued the “Administrative Measures for Risk Control of China Financial Futures Exchange” and “Administrative Measures for Abnormal Transactions of China Financial Futures Exchange”The “Administrative Measures” and “Administrative Measures for Abnormal Transactions of the China Financial Futures Exchange” and related regulations will be officially implemented from June 3.

The main contents of this revision include: first, adding a transaction limit system in the Risk Control Management Measures to further enrich and improve risk control measures to prevent market risks; second, improving the system level of abnormal transaction management and upgrading monitoring guidelines toThe “Measures for the Management of Abnormal Transactions” optimizes the types of abnormal transactions, clarifies the rules for the merger of abnormally controlled relationship account groups, and strengthens member management responsibilities.

  7.
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