On October 10, the central bank launched a new tool to support the stock market, which once again boosted the market. At 8 o'clock on the same day, the central bank issued a blockbuster announcement before the market, officially launching the swap facility of securities, funds and insurance companies, with an initial operation scale of 500 billion yuan, which also means that hundreds of billions of incremental funds will be provided for the capital market.
According to a person close to the central bank, the swap facility period shall not exceed one year, and an extension can be applied for after expiration; The scope of collateral may be expanded in the future as appropriate. These operational flexibilities indicate that there is a lot of room for the tool to be used in the future.
With the voice of the central bank, as the protagonist of participating in the swap facilitation tools, fund brokerages and other institutions are waiting for the opportunity to move, and a number of institutions said that the relevant preparatory work and landing operations need to wait for the release of the policy details of the relevant swap facilitation tools before they can be clarified, and they are currently in the wait-and-see and study.
Since the beginning of this year, due to a variety of factors, the domestic A-share market has performed poorly, and some investors have an unstable mentality and damaged confidence. In the view of analysts, as a long-term institutional arrangement, the swap facility is conducive to enhancing the resilience of the capital market, curbing pro-cyclical behaviors such as the herd effect, maintaining market stability and boosting market confidence.
YITU.com
Provide hundreds of billions of incremental funds
On October 10, the official website of the central bank announced that in order to promote the healthy and stable development of the capital market, the People's Bank of China decided to create the "Securities, Funds and Insurance Companies Swap Facility (SFISF)" to support eligible securities, funds and insurance companies to exchange treasury bonds from the People's Bank of China with bonds, stock ETFs, CSI 300 constituent stocks and other assets as collateral, central bank bills and other high-grade liquid assets.
A reporter from Beijing Business Daily noted that as early as September 24, at the press conference of the State Council Information Office, Pan Gongsheng, governor of the central bank, announced that he would create a "swap facility for securities, funds and insurance companies" in the near future to support the above-mentioned institutions to use bonds, stock ETFs, CSI 300 constituent stocks, etc. as collateral to exchange treasury bonds and central bills from the central bank to enhance their own financing and stock investment capabilities.
The announcement of the central bank announcing the official launch of this tool means that from now on, eligible relevant institutions can report to the industry regulatory authorities. It is understood that CICC and CITIC Securities are in the list of primary dealers of the central bank's open market business, which marks the landing of the mainland's first monetary policy tool to support the capital market.
From the perspective of scale, the first phase of 500 billion yuan of swap convenience will provide hundreds of billions of incremental funds for the capital market. According to the announcement of the central bank, the funds obtained by using tools can only be used to invest in the stock market, and the scale of operation can be further expanded depending on the situation, which is also consistent with Pan Gongsheng's previous statement.
A person close to the central bank told a reporter from Beijing Business Daily that the swap facility period does not exceed 1 year, and an extension can be applied for after expiration; The scope of collateral may be expanded in the future as appropriate. These operational flexibilities indicate that there is a lot of room for the tool to be used in the future. It is understood that the central bank will operate through specific primary dealers, and by observing the list of primary dealers, it may be China Bond Credit Enhancement Company.
The creation of swap facilitation is an important measure to implement the Third Plenary Session of the 20th Central Committee of the Communist Party of China to "establish a long-term mechanism to enhance the internal stability of the capital market". Authoritative experts in the industry told the Beijing Business Daily reporter that since the beginning of this year, the domestic A-share market has performed poorly due to a variety of factors, and some investors have an unstable mentality and damaged confidence. As a long-term institutional arrangement, swap facilitation is conducive to enhancing the resilience of the capital market, curbing pro-cyclical behaviors such as the herd effect, and maintaining market stability. It is also conducive to mobilizing the participation of non-bank institutions, improving the transmission efficiency of monetary policy in the capital market, and balancing the development of bonds, stocks and other markets.
Funds and brokerages are waiting for the detailed rules to be released
With the implementation of new tools to support the stock market, as the protagonists of participating in the swap facilitation tools, funds, securities firms and other institutions have also begun to take action to carry out relevant research on the swap facilitation tools.
The macro team of China Securities interpreted the specific details of the swap facilitation tool, saying that the swap facility of securities, funds and insurance companies aims to support eligible securities, funds and insurance companies to obtain liquidity from the central bank through asset pledges, and this policy will greatly enhance the ability of institutions to obtain funds and increase their holdings of stocks. In terms of specific operation methods, participating institutions replace assets with lower credit and low liquidity from the central bank to obtain high credit and high liquidity assets through mortgage.
In response to the question of whether funds and securities firms are or are willing to apply for relevant swap facilitation tools, a number of institutions told Beijing Business Daily reporters that the preparatory work and landing operation of their institutions need to wait for the release of the policy details of relevant swap facilitation tools before they can be clarified, and they are still waiting and seeing.
A fund company practitioner pointed out that "only from the current point of view, public offerings in accordance with the fund contract can not be pledged to the central bank stocks, so the specific assets pledged by the fund should mainly lie in the institution's own and own funds, because the relevant rules for swap facilitation have not yet been issued, so the company is conducting internal research."
In terms of brokers, Hualin Securities said that at present, the role of securities companies in the operation of swap facilitation is mainly to combine their own investment and research needs, actively participate in this tool, and hope to jointly promote the long-term and stable development of the securities capital market. At present, the company is willing to declare, and the specific preparatory work needs to wait for the announcement of the details of the exchange facilitation tool. As a brokerage, you may pay more attention to two aspects in terms of specific operations, namely eligibility conditions and investment management after lending.
China Securities also pointed out that at present, the details of the swap facilitation tool need to be further clarified, including the specific requirements that non-bank financial institutions need to meet to participate in the operation, such as what conditions and indicators financial institutions need to meet, liquidity coverage ratio, net stable funding ratio, or the proportion of equity asset funds; the manner in which the mortgage swap is conducted, e.g. when the mortgage swap will be completed after bidding; If the value of the collateral changes, whether the collateral needs to be marginalized, and how to determine the collateral pledge rate; specific requirements for collateral; liquidity provided by central banks; determination of rates; tool term, etc.
In addition, although the final use of funds can only be used in the stock market, there are other flexible channels, such as participating in the stock market by investing in equity funds instead of investing directly in the stock market, and what circumstances can be met to expand the size of the instrument.
Regarding the specific impact of the swap facilitation tool after it is implemented, China Securities pointed out that under normal circumstances, the swap facilitation tool is conducive to solving the problem of institutions with strong willingness to hold stock assets but relatively insufficient liquidity. The essence of the swap facility is to give liquidity to non-bank financial institutions, so as to alleviate the pressure on these institutions to hold stocks or face illiquidity when buying stocks. According to this line of thinking, brokerages have the strongest demand for liquidity, insurance companies have abundant liquidity, fund companies mostly come from raising, and their own funds account for a relatively small amount. Therefore, the degree of favorability of swap facilitation instruments is ranked as the brokerage is greater than the insurance and the fund.
Help the financial market stabilize rapidly
It should be clarified that the swap facility is "coupons for coupons", and does not expand the scale of base currency delivery.
Authoritative experts in the industry told the Beijing Business Daily reporter that through the convenient operation of swaps, non-bank institutions can replace the illiquid assets in their hands with treasury bonds and central bills, which are convenient for repurchase or sale financing in the market; However, because it is in the form of "exchanging bonds for coupons", and the central bank does not directly give money, it will not increase the supply of base money, nor will it engage in quantitative easing.
Wang Qing, chief macro analyst of Oriental Jincheng, pointed out that the swap facility is operated through the method of "exchanging bonds for bonds", and eligible institutions will use assets with low credit ratings and poor liquidity as collateral to exchange high-grade and high-liquidity assets from the central bank, which can improve the ability of relevant institutions to obtain funds and increase their stock holdings, and realize liquidity support for the capital market while not increasing the base currency.
In Wang Qing's view, the introduction of swap facilitation is conducive to improving the stability of the capital market. Non-bank institutions will have an improved ability to access funds in the face of market downturn and poor liquidity, and can increase their holdings of undervalued stocks, thereby stabilizing market sentiment, improving market liquidity, and boosting market confidence.
Although it does not put a base currency, from the perspective of international experience, it will play an important role in the rapid stabilization of the financial market.
A reporter from Beijing Business Daily noted that after the central bank announced the launch of a series of policy tools, including swap facilities, on September 24, the A-share market stabilized and rebounded significantly. In addition, there are precedents for similar monetary policy tools in the world, such as the establishment of a term securities lending facility by the Federal Reserve during the subprime mortgage crisis, allowing primary traders to borrow more liquid treasury bonds from the Federal Reserve as collateral for less liquid securities, so as to facilitate financing in the market, which played a positive role in alleviating the liquidity crisis.
"This move is tantamount to injecting money into the market, although it does not expand the number of currency issuance, but the ultimate effect of this type of tool is to let more money flow into the stock market, which is a great incentive for the market, of course, some of the benefits have been digested in the previous round of gains, and the subsequent market reaction remains to be seen, but overall it should make the stock market better." Pan Helin, a well-known economist, believes that the previous policy released a positive signal, and the central bank said that it would arrange more swap lines in the future depending on the market conditions, so the stock market is likely to stop falling and rebound.
Looking ahead, Hualin Securities pointed out that as a long-term institutional arrangement, swap facilities can maintain market stability. It is conducive to effectively maintaining the long-term steady development of the mainland capital market. At the same time, it will help securities, funds, and insurance companies to obtain funds in a timely manner to adjust positions and increase their holdings, and bring incremental funds to the market. In addition, by strictly regulating financing behavior, strengthening patient capital, strengthening investor protection, etc., we will promote the coordinated development of investment and financing, and enhance market stability and anti-risk ability.
Beijing Business Daily reporter Liu Sihong Hao Yan