On the morning of September 24, the governor of the central bank announced at a press conference held by the Information Office of the State Council that the reserve requirement ratio will be lowered by 0.5 percentage points in the near future to provide long-term liquidity to the financial market by about 1 trillion yuan. Early in the morning of September 27, the central bank officially announced a 0.5 basis point RRR cut from September 27 to increase market liquidity.
The central bank officially cut the reserve requirement ratio //
At a press conference on September 24, the governor of the central bank said that the reserve requirement ratio will be lowered by 0.5 percentage points in the near future to provide long-term liquidity to the financial market by about 1 trillion yuan, and that the reserve requirement ratio may be further reduced by 0.25-0.5 percentage points depending on the market liquidity situation within this year.
On September 27, the People's Bank of China decided to reduce the reserve requirement ratio of financial institutions by 0.5 percentage points from September 27, 2024 (excluding financial institutions that have implemented a 5% reserve requirement ratio). After this reduction, the weighted average reserve requirement ratio of financial institutions is about 6.6%.
In addition, the central bank also announced that in order to increase the countercyclical adjustment of monetary policy and support stable economic growth, from September 27, the interest rate of 7-day reverse repo operation in the open market will be adjusted from the previous 1.70% to 1.50%. The operating interest rates of the 14-day reverse repo and the temporary positive and reverse repo in the open market will continue to be determined by adding or subtracting points from the 7-day reverse repo operating rate in the open market, and the range of the plus or minus points will remain unchanged.
Wind data shows that the central bank has cut the reserve requirement ratio four times since last year, except for this time, the previous central bank announced the RRR cut on March 17, September 14, 2023 and January 24, 2024 respectively.
RRR cut boosts the market //
Wind data shows that since 2016, the central bank has made a total of 18 RRR cuts (excluding this one). On the first trading day after the RRR cut was announced, the Shanghai Composite Index rose 11 times and fell 7 times, with a probability of rising more than 60%. Among them, there were 11 comprehensive RRR cuts (excluding this time), and on the first trading day after the RRR cut was announced, the Shanghai Composite Index rose 7 times and fell 4 times, with a rise probability of 64%.
Wind data shows that one week after the RRR cut landed, consumption and growth were better than those of the cycle and finance, and the probability of obtaining excess returns was higher than that of the CSI 300. Growth styles have a higher probability of rising within 30 days after the RRR cut.
What is the impact of the RRR cut? //
From the perspective of market impact, the RRR cut will release a clear signal of stable growth, and the capital will be further abundant, which is good for the capital market as a whole.
From a macro perspective, this round of RRR cuts is conducive to maintaining reasonable and abundant liquidity, matching the scale of social financing and money supply with the expected targets of economic growth and price levels, and providing strong support for sustained economic recovery. For the banking industry, the RRR cut will directly increase the available funds of banks, so that banks have stronger credit delivery capabilities, and at the same time, optimize the capital structure of the banking system, reduce the capital cost of commercial banks, and provide banks with long-term low-cost funds.
Dong Ximiao, chief researcher of Zhaolian, said that policies such as RRR and interest rate cuts will help reduce the cost of funds of financial institutions, promote financial institutions to reduce the effective interest rate of loans, promote the steady decline of comprehensive financing costs in society, reduce the interest expenses of enterprises and individuals, and stimulate effective financing demand.
Yan Yuejin, vice president of Shanghai Yiju Real Estate Research Institute, said that this policy means that the central bank has started a new round of RRR cuts. It has played a positive role in the injection of market liquidity, and has also helped to promote the increase of bank liquidity and enhance the ability of banks to lend. The policy of the RRR cut was announced in advance, which is of great significance for signal guidance and expected guidance, and at the same time, it is also clear that according to the market liquidity situation, the stock reserve rate may be further reduced at the right time. This also shows that the easing of liquidity will be further released, which will help continue to promote the subsequent easing of the monetary financial market and loan market.
Zhang Bo, president of 58 Anjuke Research Institute, said that after the Federal Reserve announced the interest rate cut, this also indicates that the mainland will further release liquidity to the market at an accelerated pace, and by optimizing the capital structure of financial institutions, greater efforts will be made to enhance the financial service capacity, better support the recovery of the real estate industry, and promote the steady operation of the economy. At the same time, the liquidity released by the RRR cut may be seen by investors as a signal of government support for economic growth. Such expectations are likely to stimulate investor confidence in domestic assets and increase demand for such investments.
Review of historical articles
"The Central Bank's Official Announcement Series of King Bombs"
"The Central Bank's Big Move Towards Currency, Real Estate Stocks and Bonds Exchange"
Suddenly! Global sprint interest rate cuts" "Gold bull market, how long can it last? 》
Enter the command in the Wind financial terminal
WBUY
Once you open an account, you can link the fund market with one click
Place bulk orders online and manage multiple accounts easily
Portfolio asset penetration management, real-time monitoring of underlying positions
Purpose-built for institutions
One-stop fund investment research, trading and management platform