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15 Jan 2015
China sees less possibility of an RRR cut - ING
FXStreet (Barcelona) - Analysts at ING note that today’s Shadow bank credit data reduces the likelihood of an RRR cut in China.
Key Quotes
“And for the first time all year shadow bank credit – entrusted loans, trust loans, banker’s acceptances, corporate bonds and non-financial enterprises’ domestic equity – exceeded new CNY loans in December, CNY 939 billion vs. CNY 697 billion. We think policies to clean-up the shadow banking system were loosened to support growth. Such loosening reduces the need for broader policy easing like an RRR cut and we are reviewing our forecast of 100bp of RRR cuts in the first half of the year for downward revision (Bloomberg consensus 75bp).”
“Almost all of the new CNY loans were medium- and long-term. New MLT corporate loans were CNY 529 billion, the highest figure since January 2010 in the midst of the 2009-10 credit boom. We assume that, like then, the loans were in support of central government infrastructure projects, which seems consistent with recent talk of a CNY 7 trillion pipeline of infrastructure projects.”
“The loan-to-deposit rate increased to 71.7%, the highest level since April 2005. In early January the authorities broadened the categories of deposits for calculating the 75% LDR ceiling, from which we inferred that they viewed weak loan demand as due to a binding LDR ceiling rather than weak loan demand. We assume they will see vindication for their view in the December money and credit data.”
Key Quotes
“And for the first time all year shadow bank credit – entrusted loans, trust loans, banker’s acceptances, corporate bonds and non-financial enterprises’ domestic equity – exceeded new CNY loans in December, CNY 939 billion vs. CNY 697 billion. We think policies to clean-up the shadow banking system were loosened to support growth. Such loosening reduces the need for broader policy easing like an RRR cut and we are reviewing our forecast of 100bp of RRR cuts in the first half of the year for downward revision (Bloomberg consensus 75bp).”
“Almost all of the new CNY loans were medium- and long-term. New MLT corporate loans were CNY 529 billion, the highest figure since January 2010 in the midst of the 2009-10 credit boom. We assume that, like then, the loans were in support of central government infrastructure projects, which seems consistent with recent talk of a CNY 7 trillion pipeline of infrastructure projects.”
“The loan-to-deposit rate increased to 71.7%, the highest level since April 2005. In early January the authorities broadened the categories of deposits for calculating the 75% LDR ceiling, from which we inferred that they viewed weak loan demand as due to a binding LDR ceiling rather than weak loan demand. We assume they will see vindication for their view in the December money and credit data.”