海通证券股份有限公司 JIANG Chao,ZHOU Xia,ZHANG Qingyun
Investment highlights:
Topic: Prediction of financing demand based on financial data
1) Tightened housing credit cast doubt on sustainedgrowth of mediumandlong-term loans to residents.The total amount of incrementalmediumandlong-term loans toresidents in January was RMB630bn, which showed a positive YoY growth. Since the real estate regulation policy was launched in October last year, the downward trend of real estate sales has remained difficult to reverse; with MLFinterest rate revised up in January, the discountof banks’mortgagerates was reduced and the increasing weighted mortgagerates will affect house sales. With PBOC’s policy guidance on tightening house credit, the amount of incremental mortgage loansis expected to fall in the future.
2) Mediumandlong-term loans to enterprises picked up, and investors are advised to notice infrastructure investment.The total amount of mediumandlong-term loans to non-financial enterprises in January was RMB1.52tn, which represented a YoY increase of RMB460bn, and such growth was attributedto factors as enterprises’continuousre-stocking, release of PPPsupporting loans, and sluggish issue of enterprise bonds. In the future, with tightening of real estate financing, increased infrastructure investment is required to maintain the positive growth of mediumandlong-term loans to enterprises. Investors should notice PBOC’s financing policy for infrastructureand small & micro businesses.
3) High growth of social financing is related to a pickup ofoff-balance-sheet non-standard financing. The reason for high growth of additional social financing in January is that the increase of entrusted and trust loans and the positive YoY growth of undiscounted bills offset a substantial decline in corporatedebt financing. Because real estate enterprises’bond and loan financing channels were regulated, relevant enterprises shifted to off-balance-sheet non-standard financing. This contributed to a recovery of incrementalentrusted and trust loans in January andalso gave rise to the concern for higher financing cost. With stricter regulation, non-standard financing for real estate enterprises is likely to slide in the future.
4) Given neutral and relatively tight monetarypolicy, financing demand will show a downward trend. Although social financing rose sharply YoY in January, real estate related residential housing loans, real estate non-standard financing and real estate bonds were all restricted. The future scale of incrementalsocial financing depends on whether infrastructure and manufacturing related financing will continually grow in the future. We maintain that increasing interest rates will surely affect enterprises’financing demand with PBOC’s neutral and relatively tight monetary policy.
Review of market performance last week: bidding results got warmon primary market, while bond on secondary market stopped falling and rebounded
Primary market: allocation drove a turnaround of bidding rates. With market sentiment gettingwarm, allocation subscription rose and the bid-winning rates of T-bonds, CDB bonds and Eximbank bonds on the primary market were lower than those on the secondary market. Last Friday, the Ministry of Finance issued 30Y ultra long-term T-bonds, whosebid-winning rate was 9BP below that on the secondary market andhad a 2.5x biddingratio.The bid-winning rate of 10Y Eximbank bonds was 8BP below that on the secondary market with a7.12x biddingratio, signaling good demand. Last week, book-entry T-bonds worth RMB50bn and policy financial bondsworth RMB48bn were issued, whileno local government bonds were issued. Interest rate bonds worth RMB98bn were issued, which represented a decrease of RMB42bn compared with the previous week.
Secondary market: bond market stopped falling and rebounded. Last week, bond market rose with T-bonds rising more than other bonds and long-term bonds rising more than short-term ones. To be specific, 1Y T-bonds went down by4BPto 2.8%and 1Y CDB bonds dropped3BPto 3.35%; 10Y T-bonds decreased11BPto 3.33%and 10Y CDB bonds dropped 3BPto 4.11%.
Investment strategy in bond market this week: Monetary policy is unlikely to be too easy or too tight, and the trading window is approaching
T-bonds remain banks’optimal assets. In terms of term spread, the term spread of T-bonds and CDB bonds are now at mean value location; in terms of category spread, the spread between 10Y CDB bonds and T-bonds is at a high since 2014and there will be room for spread narrowing in the future. The low spread between CDB bonds and otherbonds also indicates the downside potential for interest rate of CDB bonds. According to price relations of banks’on-balance-sheet assetscarried out on the basis ofinterest rates of ordinary loans and housing loanspublished in 2016Q4, T-bonds are the best assets, immediately followed by interbank deposits and CDB bonds, whileordinary loans and housing loans have the lowest cost performance.
Allocation window will be opened gradually. Considering that financing for real economy grew considerably in January, the economy is expected to remain stable in the coming 3months and short-term falling inflation is likely to improve the tight-liquidity expectation. From June on, investors need to guard against American further interest rate hikes, CPIrebound and rising expectation on PBOC’s money tightening. Therefore, the time before June may be the window period for short-term trading.From the perspective of asset allocation, current yields gradually have allocation value. If future regulatory policies are not heavy-handed, the time window for allocation will be opened step by step. We revised down our expectation of the central trend of 10Y T-bonds yieldsto 3.0%~3.4%in the short term.
Investment highlights:
Topic: Prediction of financing demand based on financial data
1) Tightened housing credit cast doubt on sustainedgrowth of mediumandlong-term loans to residents.The total amount of incrementalmediumandlong-term loans toresidents in January was RMB630bn, which showed a positive YoY growth. Since the real estate regulation policy was launched in October last year, the downward trend of real estate sales has remained difficult to reverse; with MLFinterest rate revised up in January, the discountof banks’mortgagerates was reduced and the increasing weighted mortgagerates will affect house sales. With PBOC’s policy guidance on tightening house credit, the amount of incremental mortgage loansis expected to fall in the future.
2) Mediumandlong-term loans to enterprises picked up, and investors are advised to notice infrastructure investment.The total amount of mediumandlong-term loans to non-financial enterprises in January was RMB1.52tn, which represented a YoY increase of RMB460bn, and such growth was attributedto factors as enterprises’continuousre-stocking, release of PPPsupporting loans, and sluggish issue of enterprise bonds. In the future, with tightening of real estate financing, increased infrastructure investment is required to maintain the positive growth of mediumandlong-term loans to enterprises. Investors should notice PBOC’s financing policy for infrastructureand small & micro businesses.
3) High growth of social financing is related to a pickup ofoff-balance-sheet non-standard financing. The reason for high growth of additional social financing in January is that the increase of entrusted and trust loans and the positive YoY growth of undiscounted bills offset a substantial decline in corporatedebt financing. Because real estate enterprises’bond and loan financing channels were regulated, relevant enterprises shifted to off-balance-sheet non-standard financing. This contributed to a recovery of incrementalentrusted and trust loans in January andalso gave rise to the concern for higher financing cost. With stricter regulation, non-standard financing for real estate enterprises is likely to slide in the future.
4) Given neutral and relatively tight monetarypolicy, financing demand will show a downward trend. Although social financing rose sharply YoY in January, real estate related residential housing loans, real estate non-standard financing and real estate bonds were all restricted. The future scale of incrementalsocial financing depends on whether infrastructure and manufacturing related financing will continually grow in the future. We maintain that increasing interest rates will surely affect enterprises’financing demand with PBOC’s neutral and relatively tight monetary policy.
Review of market performance last week: bidding results got warmon primary market, while bond on secondary market stopped falling and rebounded
Primary market: allocation drove a turnaround of bidding rates. With market sentiment gettingwarm, allocation subscription rose and the bid-winning rates of T-bonds, CDB bonds and Eximbank bonds on the primary market were lower than those on the secondary market. Last Friday, the Ministry of Finance issued 30Y ultra long-term T-bonds, whosebid-winning rate was 9BP below that on the secondary market andhad a 2.5x biddingratio.The bid-winning rate of 10Y Eximbank bonds was 8BP below that on the secondary market with a7.12x biddingratio, signaling good demand. Last week, book-entry T-bonds worth RMB50bn and policy financial bondsworth RMB48bn were issued, whileno local government bonds were issued. Interest rate bonds worth RMB98bn were issued, which represented a decrease of RMB42bn compared with the previous week.
Secondary market: bond market stopped falling and rebounded. Last week, bond market rose with T-bonds rising more than other bonds and long-term bonds rising more than short-term ones. To be specific, 1Y T-bonds went down by4BPto 2.8%and 1Y CDB bonds dropped3BPto 3.35%; 10Y T-bonds decreased11BPto 3.33%and 10Y CDB bonds dropped 3BPto 4.11%.
Investment strategy in bond market this week: Monetary policy is unlikely to be too easy or too tight, and the trading window is approaching
T-bonds remain banks’optimal assets. In terms of term spread, the term spread of T-bonds and CDB bonds are now at mean value location; in terms of category spread, the spread between 10Y CDB bonds and T-bonds is at a high since 2014and there will be room for spread narrowing in the future. The low spread between CDB bonds and otherbonds also indicates the downside potential for interest rate of CDB bonds. According to price relations of banks’on-balance-sheet assetscarried out on the basis ofinterest rates of ordinary loans and housing loanspublished in 2016Q4, T-bonds are the best assets, immediately followed by interbank deposits and CDB bonds, whileordinary loans and housing loans have the lowest cost performance.
Allocation window will be opened gradually. Considering that financing for real economy grew considerably in January, the economy is expected to remain stable in the coming 3months and short-term falling inflation is likely to improve the tight-liquidity expectation. From June on, investors need to guard against American further interest rate hikes, CPIrebound and rising expectation on PBOC’s money tightening. Therefore, the time before June may be the window period for short-term trading.From the perspective of asset allocation, current yields gradually have allocation value. If future regulatory policies are not heavy-handed, the time window for allocation will be opened step by step. We revised down our expectation of the central trend of 10Y T-bonds yieldsto 3.0%~3.4%in the short term.
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