Why did the central bank "rarely" release credit data at noon?

On September 11th, at 12:30 PM, the central bank released data showing the increase in social financing in August.

In addition to the data itself, the timing of this release is particularly noteworthy. Historically, it is extremely rare for the central bank to choose to announce credit data at noon.

Guangda Securities believes that considering the overall performance of credit and social financing data in August, combined with the current market situation, the release of financial data at noon cannot be ruled out as a way to "add icing on the cake" for stabilizing the exchange rate and the capital market.

The analyst team at Guangda Securities further explained in a research report released on September 12th that the depreciation of the RMB exchange rate to a critical level and the low sentiment in the A-share market are the two major factors that prompted the central bank to release the data in advance.

On the one hand, as the central bank successively adjusted the macro-prudential parameters for cross-border capital, the reserve requirement ratio for foreign exchange deposits, and continued to use the countercyclical factor, the RMB exchange rate against the US dollar has depreciated to a critical level.

On the morning of September 11th, the central bank issued a statement regarding a special conference on the national foreign exchange market self-discipline mechanism, stating that the financial regulatory authorities "have the ability, confidence, and conditions to maintain the basic stability of the RMB exchange rate, take action when necessary, resolutely correct unilateral and pro-cyclical behaviors, resolutely deal with behaviors that disrupt market order, and resolutely guard against the risk of exchange rate overshooting."

The statement of "having the ability, confidence, and conditions" boosted the RMB exchange rate. Based on this, the central bank released the well-performing financial data at noon, which, with the concentrated support of policies and data, can better stabilize the exchange rate. Moreover, the US dollar index has temporarily weakened, and the offshore exchange rate has risen by nearly 700 basis points.

On the other hand, after the implementation of a package of policies to stimulate the active capital market in August, although the A-share market has rebounded and remained above 3100 points overall, its sustainability is relatively weak. There is still a net outflow of northbound funds, reflecting a weak market confidence and differing expectations for the effectiveness of the policies.

In this situation, starting with the sharp rise in the exchange rate, releasing financial data in line with the trend helps inject confidence into the capital market. After the midday break, the Shanghai Composite Index also experienced a wave of gains.

Turning Point for Credit Figures Improvement in the Year May Have Arrived

On August 18th, the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly held a televised conference to study and implement central decisions, and to discuss financial support for the development of the real economy and the prevention and resolution of financial risks.

Guangda Securities believes that the convening of this conference may mark a turning point for the improvement of credit figures in the year, conveying a clear signal of stabilizing credit:

(1) Based on the consideration of stabilizing credit and expectations, the central bank held a conference on stabilizing credit in the latter half of the month, implying a relatively weak credit injection in the first half of this month and providing strong guidance for subsequent credit injections. This is evidenced by the trend of bill discount rates in August. In the first half of August, the bill rates were generally lower than in normal years, while since the latter half of August, the bill rates have consistently approached zero. The occurrence of a significant surge in loans is reflected.

(2) From the actual results, after the analysis of the monetary credit situation, there was a significant improvement in credit readings in the month following the analysis (mid-quarter) and the next month (end of quarter), with a monthly YoY increase of approximately 355 billion yuan on average. From this, we can deduce a pattern that, without considering other variables, the effect of conducting a monetary credit situation analysis can generally last for about 2 months in stabilizing credit.

(3) Although this three-department meeting was not named "Monetary Credit Situation Analysis Meeting," it explicitly proposed at the meeting that "the financial support for the real economy should be sufficient, the pace should be stable, the structure should be optimized, and the prices should be sustainable."

Based on the above analysis, Guotai Junan Securities believes that the "8.18" three-department meeting can be regarded as a "turning point" for credit readings in the year. The credit prosperity index from August to December will generally be between the first half of the year and July:

1. It is expected that in the last week of August, there will be a significant surge in credit, and it is not ruled out that the central bank has moderately increased the credit target based on the August bank credit reporting plan, aiming to guide a significant rebound in credit readings in August. In this regard, large banks and nationwide joint-stock banks are expected to fully play the "leading effect."

2. As the end of the quarter, September is likely to see further efforts in credit expansion, and there will also be some improvement in the loan structure compared to July and August, with an increase in the proportion of medium- and long-term loans.

3. The outlook for credit in the fourth quarter is not pessimistic, but it is not ruled out that October, as the beginning of the quarter, may experience seasonal weakness. The larger the surge in credit in September, the greater the possibility of a sharp decline in October. However, the probability of a situation similar to that of credit and social financing in July is not high.

Analyzing Credit Expansion from Bill Discounting

Guotai Junan Securities believes that the "quantity-price" trend of bill discounting in August indirectly confirms the increment and pace of credit expansion. The trend of bill quantity and price in August can be roughly divided into two stages:

First stage: From early August to the 28th, the bill interest rates continued to fluctuate downward and even approached zero. This reflects two issues: (1) In the first half of the month, the credit expansion situation was poor, and banks, especially state-owned major banks, continued to occupy the narrow credit quota through bill collection, thereby guiding the downward trend of bill interest rates. (2) After the three-department meeting, it is expected that the central bank has moderately increased the requirements for credit expansion for state-owned major banks and joint-stock banks. However, state-owned major banks will not immediately start using non-bill loans for expansion, as August is a mid-quarter month. Even if they do, it will only be reflected in the last few days of the month. In this situation, the enhanced effectiveness of policy-driven measures will stimulate state-owned major banks to accelerate bill collection, thereby pushing the bill interest rates close to zero.

Second stage: In the last 2-3 days of August, the bill interest rates started to rebound, with the 1-month government bond repo rate reaching a peak of 1.58%. There are three reasons for the rebound in bill interest rates:

First, after state-owned major banks collected a large number of bills in the early stage, they have initially replenished the narrow credit scale effectively. As the end of the month approaches, they will switch to other non-bill loans for expansion while also considering deposit derivatives. At this time, the demand for bill collection will cool down, and there may even be temporary selling of bills.

Secondly, based on the general rule of zero interest rates on past bills, the month-end bill rates are likely to rebound. There may be elements of "buy high, sell low" transactions, that is, selling when the bill interest rate is zero (when the bill price is highest), and buying back the bills after the interest rate rises (price falls) across the month, resulting in a potential interest rate spread of 100-200bp.

Thirdly, the rebound in bill rates at the end of August this year was not as significant as the same period last year, which does not fully reflect that credit growth is expected to be lower on a year-on-year basis. It is possible that smaller banks may have received fewer bills at the end of August due to credit growth falling short of target plans.

Finally, let's take a look at the overall bill discounting data for August.

On one hand, the average interest rate for 1-month discounted bills is 0.71%, lower than the same period last year. On the other hand, although the bill rates rebounded at the end of the month, the magnitude was significantly lower than the same period last year, indicating that banks' pressure to discount bills near the end of the month was not too strong. Therefore, Everbright Securities believes that it is only natural for bill financing to increase on a year-on-year basis in August this year.