Haitong Securities Jiang Chao: Why do n’t you have more money but you have both stocks and bonds?

Haitong Securities Jiang Chao: Why do n’t you have more money but you have both stocks and bonds?

Source: Jiang Chao’s Summary of Macro Bond Research I. Since the global easing cycle has restarted into 19 years, a new round of easing has appeared in global monetary policy.

  The United States has suspended interest rate hikes.

  At the interest rate meeting last week, the Fed announced that it would suspend interest rate hikes, and the bitmaps announced at the meeting showed that most Fed members believe that the Fed will not raise interest rates in 2019, and there will be only one rate hike in 2020.

At the December meeting of the Air Force, most members thought that there would be two interest rate increases in 19 years.

In fact, the Federal Reserve announced that it would end its contraction in September.

  And in the futures market, there have even been expectations of interest rate cuts. The probability of interest rate cuts in December corresponding to the federal funds rate futures data has exceeded 50%.

  Europe initially restarted TLTRO.

  At the interest rate meeting in early March, Europe announced that it will begin a two-year directional long-term refinancing operation (TLTRO) in September. At the same time, it revised its forward-looking guidelines on interest rate hikes.The ranking of the summer of 2019 is further delayed.

  Japan continues to be relaxed.

  In the United States and Europe, at least in the past, they have experienced varying degrees of austerity. The United States withdrew from QE and continued to raise interest rates. Europe gradually withdrew from QE at the end of 18 years.

Approximately, Japan still maintained -0 at the latest interest rate meeting.

The 1% benchmark interest rate remains unchanged, and the 10-year government bond rate remains unchanged at 0%, and Japanese government bonds can only be purchased at a rate of 80 trillion yen per year.

  In other words, Japan’s exit from QE and negative interest rates are in the foreseeable future.

  India has resumed interest rate cuts, with many countries suggesting interest rate cuts.

  Entering 2019, India has gradually become the first supplement to announce a rate cut. On February 7, it announced that it would reduce the benchmark repo rate by 25bp to 6.

25%, and India has raised interest rates twice in the past year and a half.

India’s once-a-year overall expected growth rate will remain moderate in the short term, providing room for a rate cut.

  Subsequently, Egypt previously announced a rate cut of 100bp on February 15.

  In the Federation, after experiencing a currency crisis for 18 years, its benchmark interest rate soared to 60%, but the lower limit of the benchmark interest rate of 60% was cancelled at the end of 18 years, and interest rates have been reduced by about 40% since 19 years.

  In addition, many countries have previously suggested the possibility of interest rate cuts.

For example, the Federal Reserve of Australia issued a statement in February, which significantly lowered its economic growth expectations, and hinted that the probability of future interest rate cuts increased, while previous interest rate announcements stated that interest rate increases may exceed interest rate cuts.

  The market also expects that Turkey, Poland, the Philippines and other countries may initiate interest rate cuts in 19 years.

  Starting from the end of 2014, through the US Federal Reserve’s withdrawal from QE, the long-term interest rate hike cycle was initiated, driving the global monetary policy into a tightening cycle.

Now that the US interest rate hike cycle is coming to an end, the global currency tightening cycle may have ended, and it may enter a new round of easing in the future.

  Second, what is easing, is there more money or lower interest rates?

  However, the statement of a new round of easing cycles may not hold true for some economies.

  For example, in Japan and the Eurozone, the benchmark interest rates have been around zero during the last global tightening cycle. They have not experienced the rate hike cycle like the United States. Since there has been no tightening, there is no new round of easing.statement.

  The issue is?

Why has Japan and the Eurozone always maintained zero or even negative interest rates?

Isn’t it easy enough if interest rates are all negative?

Since it is already relaxed, why is it not effective?

  The reason is that easing actually has two budget implications. Low interest rates are just restructuring, while substitution is the amount of money. In popular terms, there is more money.

  Japan and Europe: Low interest rates but scarce money.

  But in Japan and the Eurozone, it is precisely the amount of money that goes wrong, low interest rates but no money.

In Japan, the average growth rate of its broad currency M3 over the past 20 years has been only 2%.

Although the euro area is a bit stronger than Japan, the average growth rate of its general currency M3 over the past 10 years has been only 3%.

  In other words, although the money in Japan and the euro area is very cheap, everyone still does n’t want to borrow money, and the currency cannot flow, so the money is hoarding gradually, so that Japan ‘s total assets have gradually reached 560 trillion yenIt exceeds Japan’s GDP, but Japan’s general currency M3 is 1,343 trillion yen, which is only twice as much as the total assets of the Bank of Japan, which means that the whole society is still very short of money.

  Emerging markets: High interest rates but a lot of money.  In emerging markets, high interest rates are usually the norm. For example, the interest rate in Argentina can be as high as 60%, while the interest rate in India is still as high as 6 after the rate cut.

25%, far higher than the United States, Japan and Europe.

  In our impression, high interest rates definitely mean that there is a lack of money, but in fact the opposite is true. Emerging markets often lack money.

For example, Argentina, after 90 years, the average growth rate of its broad currency M3 was as high as 36%, which is equivalent to doubling the currency volume every two years or so.

In more extreme countries such as Venezuela, the total amount of money will double many times within a year.

  It stands to reason that these emerging market countries have so much money, so liquidity should be very easy, but what we see is that Argentina will have a currency crisis every few years, often relying on external assistance such as the IMF to surviveThis shows that money alone does not necessarily achieve monetary easing.

  It can be seen that although everyone feels that the global monetary policy has ushered in a new round of easing, but specific to each country, the answer is whether the currency is tight or tight, but the answer is different.

  Third, the past is clearly tight: there is a lot of money but high interest rates!

  China used to have a lot of money.

  After the 2008 financial crisis, China ‘s housing prices continued to grow, giving the impression that there is a lot of money and flooding the mountains of gold. Therefore, the main sign of China ‘s loose currency in the past was more money.

  From 2008 to 17, the accumulation of China’s common currency M2 rose from 40 trillion to 167 trillion, an increase of more than three times, with an average annual growth rate of 15.

4%, far more than the same period of 11.

9% GDP nominal growth rate.

  In fact, the broad money M2 is not enough to underestimate China’s real currency scale, because M2 only includes bank deposits, but since 2011, the scale of various banks’ wealth management, trust and other shadow banks has grown, and most of these currencies are notThey are not included in bank deposits or are consolidated into the bank’s balance sheet as other bank liabilities.

  If China’s total currency is measured from the perspective of total bank debt, it was only 55 trillion yuan at the beginning of 2008, and it has risen to 250 trillion yuan at the end of 17 years. The growth rate has nearly quadrupled in 10 years, and the average annual growth rate exceeds 17%.Perhaps it is a more realistic portrayal of the Chinese currency.

  But interest rates are also high.

  Although China has not been short of money in the past 10 years in terms of quantity, the currency has not been so loose on the surface in terms of interest rates.

  From 2008 to 17, the average value of China’s 10-year government bond rate was 3.

6%, but close to 5%.

Because banks can deduct 25% of corporate income when buying Treasury bonds, the average interest rate on CDB bonds that is similar to the risk of Treasury bonds but needs to be taxed is 4.

2%, but close to 6%.

  Treasury bonds and CDB bonds are risk-free interest rates that only governments and policy banks can enjoy.

For society as a whole, borrowing money can usually only go to a bank, so the loan interest rate is more representative of the capital cost of the real economy.

From 2008 to 17, the average lending rate of Bank of China was 6.

6%, and as high as 8%.

  However, the loan interest rate cannot actually represent China’s real interest rate level. Because of various reasons, such as institutional and regulatory issues, many financing activities of local government financing platforms, real estate companies, and private enterprises in China cannot be directly borrowed through banks or through shadowBanks seek bank loans indirectly, and non-standard financing costs such as trusts in shadow banks are usually 8-10% or more.

  Fourth, now loosely and tightly: not much money but low interest rates!

  There is not so much money now.

  After two years of deleveraging, China’s currency growth rate has dropped significantly.

  As of February 19, the growth rate of China’s general currency M2 was 8%, with an average growth rate of 15 in the past 10 years.

About half of 4%.

From the previous expected growth rate of bank losses, the current growth rate is only 7.

7%, an average growth rate of only 17 over the past 10 years.

A fraction of 1%.

  In terms of the number of new currencies, M2 has grown by an average of 13 in the past two years.

8 trillion, which is equivalent to the incremental level in 2009, lower than the 15 trillion in 2012.

In terms of total bank debt, the banks’ total supplementary debt in the past two years was 18 trillion, and in 15/16, the average annual increase was nearly 30 trillion.

  Therefore, no matter whether it is observed from the growth rate of the currency or the amount of currency replenishment, it is actually not that much compared with China’s current money in the past 10 years!
  But interest rates have fallen sharply.

  Although the amount of money looks less than before, it is more lenient in terms of interest rates.
  After deleveraging, China’s risk-free interest rate has fallen sharply, and the current 10-year Treasury rate is only 3%.

1%, while the 10-year CDB bond rate has replaced 3.

6%, far below the average level of the past 10 years, and not far from the lowest level in history.

  Looking at the loan interest rate, the bank loan interest rate at the end of 18 has been reduced by 5.

91%, we estimate that in March 19 or has replaced 5.

About 7%, which is well below the average of the past 10 years.

  What’s more important is that with the implementation of the new regulations on capital management, the growth of shadow banking has been suppressed. After blocking the financing barrier, we reopened the financing front and increased the local government’s special debt.Issuance replaced the hidden debt of the financing platform, increased the issuance of corporate bonds, and replaced the shadow banking financing of real estate companies and private enterprises. Whether it is local government bonds or corporate bonds, the average interest rate is much lower than that of shadow banks.Financing costs.

  Therefore, on the whole, China ‘s real interest rate has fallen sharply, and it is not only reflected in the decline in national debt interest rates, but more importantly, the non-standard financing interest rates of shadow banks have fallen sharply.

  Why is it loose?

Because it reduces the need for invalid financing!

  Many people do not understand why they have less money and lower interest rates.

Should n’t it be the other way around?

  From the micro experience, our experience is that the poor can only find usury when borrowing money, and the rich can borrow cheaply. It is true that less money has higher interest rates and more money has lower interest rates. On the micro level, the amount of money is often reflected asThe supply of funds, which is inversely related to the interest rate level.

  However, on a macro level, the quantity of money is not only reflected in the bank’s capital supply, but also reflects the capital demand of the economy, and capital demand and interest rates are positively related.

And we regulate shadow banking and government hidden debt, the more important significance is to reduce the need for invalid financing.

  Everyone can imagine that if we allow local governments and real estate companies to borrow freely, and under the blessing of the real estate bubble and land finance, the funding needs of financing platforms and real estate companies are almost unlimited, and their ability to bear interest rates is also the highestAnd if banks can lend to financing platforms and real estate companies through various channels, the bank’s loan interest requirements for other industries will also increase.

  However, after limiting the borrowing demand of local governments and real estate companies, banks will have too many channels for high-interest loans, and they will be willing to lend to other industries with low loan interest rates, which will actually reduce the financing cost of the whole society.
  Therefore, after the control of shadow banking, China’s ineffective financing demand has fallen sharply, which means that interest rate levels will inevitably expand, and China is expected to officially enter the era of low interest rates in the future.

  Five, more money is beneficial to the housing market, low-interest-rate stocks and bonds double cattle!

  Therefore, monetary easing actually has two meanings. One is that there is a large amount of money, and the other is that the currency interest rate is low. This is not the same thing, but it may be an antagonistic state.

China’s past monetary easing was the first quantitative easing in its budget, and this round of monetary easing is actually a second dimension of falling interest rates.

  And different monetary easing conditions will actually have completely different effects on asset prices.

  A large number of currencies will help house prices rise!

  In the past, China was in a state of loose currency, with an average annual growth rate of M2 as high as 15.

At 4%, the M2 budget has tripled in 10 years.

At the same time, the average increase in house prices in China’s first-tier cities is also about three times, which means that over-currency is the most important reason for house prices to rise.

  And only in China, we find that house price growth in many countries is accompanied by high currency growth.

For example, in the United States from 1964 to 1979, its broad money M2 increased by about 2.

It is about 5 times, and the price increase in the same period is also 2.

5 times.

Japan ‘s currency growth in the 1980s was one.

5 times, while the national land price rose by 90% in the same period, 6 metropolitan land prices rose by 3 times.

  Conversely, if currency growth slows, house prices will not rise.

  For example, the growth rate of the general currency M2 in the United States has been replaced from 10% in the 1970s to 6% after the 1980s, and the corresponding average annual increase in house prices in the United States has replaced 4% from 10%.

  The growth rate of Japan’s general currency was as high as 10% in 80-90, and replaced 2 after 91.
5%, the corresponding increase in Japanese land prices from 7% to -4%.

  Low currency interest rates are good for financial assets!

  The level of interest rates has a significant impact on financial assets.

  First of all, the level of interest rates directly affects the bull market in the bond market. The rise in interest rates causes the bond market to bear, while the decline in interest rates causes the bond market to go bulls. Since 18 years, China’s interest rates have risen and fallen, which has given rise to a large bond market.

  On average, interest rates also have a significant impact on stock market estimates.
  According to the pricing model of stocks, there are three main factors that affect stock valuations. One is earnings growth, the other is interest rates, and the third is risk appetite. The level of interest rates has a significant impact on stock market returns.

  Judging from the historical data of the past 100 years in the United States, there is a clear inverse relationship between its stock market valuation and interest rate levels.

For example, in the 1970s, the United States was in the era of high interest rates. The interest rate on government bonds was as high as 10%, and the stock price-earnings ratio once replaced about 8 times. After 1980, the US interest rate continued to fall. The current 10-year U.S. Treasury rate is less than 3%.The price-earnings ratio is as high as 20 times.

  Some people may say that it is because the profitability of US companies has improved that the estimates of US stocks have increased.

In fact, in the 1970s, the average annual growth rate of corporate profits in the United States was as high as 10%, and after 1980, the average annual growth rate of profits was only 6%. The growth rate of profits fell sharply and the stock market volatility increased significantly. The only explanation is interest rates.Became toxic.

  In the 1970s, the interest rate of US Treasury bonds was as high as 10%. Buying Treasury bonds and paying interest for 10 years will pay back, so everyone has the same requirements for the stock market, so the stock price-earnings ratio is less than 10 times.

Now the interest rate of the US Treasury bonds is less than 3%, and it takes more than 30 years to buy Treasury bonds to pay back the index, so 20 times the stock market returns are not expensive.

  From the perspective of China, the stock market has fallen by half from 2007 to 18, but the main reason is that the estimate has dropped significantly. The Shanghai Stock Index’s price-earnings ratio replaced 55 times the highest in 2007 instead of about 10 times at the end of 18 years.

  But in fact, the decline in the price-earnings ratio is not due to the increase in profits of listed companies. We estimate that the profits of listed companies have increased at the same time.

8 times, the profit growth rate is 11% per year. In fact, the profit growth rate is much higher than that of the US stock market, but the price-earnings ratio of the A shares has been much higher than that of the US stocks.

  We believe that the key reason is that China’s currency has been issued in the past 10 years, and it is in an era of high interest rates, which have dampened stock market returns.

After the great development of shadow banking after 2012, the whole society’s funds were concentrated in shadow banks with high interest rates, so the market also used the same high interest rate standards to require securities, and the stock market’s returns fell.

  However, after the shadow bank was controlled, China ‘s interest rate level dropped sharply, which means that the stock market estimates are also expected to recover. The growth of the stock market since 19 years has been accompanied by an estimated recovery. The background is the sharp decline in China’s yield levels.

  Leverage tax increases and reductions in an attempt to give birth to double debt!

  Over the past 40 years, the average annual return of US stocks has reached 10%, of which about 2% comes from segmentation and repurchase, 6% comes from corporate profit growth, and 2% comes from improvement.

  The average annual return of China’s Shanghai Stock Exchange Index over the past 10 years has recovered to -4%, with dividends resetting at 2%, corporate profit growth at 11%, and an estimated annual decline of 15%. The essence of the decline in the stock market is an estimated fall.

  But if the estimate of the Chinese stock market no longer declines, if the current 2% dividend rate is maintained, and corporate profit growth can be maintained at 7%, of which 4-5% comes from economic growth, and the other 2-3% comes fromAs the rise rises, then it can provide a return rate of about 9% per year, which is very close to the US stock market over the past 40 years.

  If we agree that after the currency contraction, China officially enters the era of low interest rates, and the stock market estimates have bottomed out. At the same time, vigorous tax and fee reductions are expected to release the potential of household consumption and corporate innovation, so that China’s economy and corporate profits will maintain moderate growth.Then it means that China’s stock market is expected to enter a long-term slow bull.

  To sum up, the loose currency in the past 10 years has given rise to the bull market in real estate, and if the future enters the era of low interest rates, coupled with tax and fee reductions, it will help support the bulls in stocks and bonds!

  I. Economy: Industrial production improvement 1) Industrial production improvement.

In the first 22 days of March, the coal consumption growth rate of the 6 major groups increased by 4 per year.

7%, the growth rate is significantly better than the negative growth of the previous two months, which means that industrial production or improvement in March improved.

  2) Demand is still weak.

In the first 22 days of March, the sales volume of real estate in 4 large first-tier cities increased by 38%, the sales of real estate in 12 second-tier cities increased by 14%, and the sales of real estate in 18 third- and fourth-tier cities fell by 13%. Real estate sales in third- and fourth-tier cities remained weak.
In the first two weeks of March, the retail sales of automobiles increased by -21% and -25%. Although the decline was narrower than the first week, the decrease was still more than 20%.

  3) High inventory levels have fallen.

Last week, steel stocks in major cities across the country dropped to 1,681 tons, and rebar stocks fell to 917 tons, a significant decline for three consecutive weeks.

The coal inventory of the six major groups also replaced about 1560 from the previous high of 1700, but the coal inventory of Qinhuangdao rose from a low of 510 during the Spring Festival to 630.

  Second, prices: focus on rising inflation 1) food prices rebound.

Last week, pork prices rose sharply, vegetable prices rose slightly, aquatic products and food prices fell, and food prices rose by a quarter.


  2) CPI is expected to rise sharply in March.

Since March, the price of vegetables has fallen slightly, and the price of pigs has risen sharply. Considering the significant decline in the CPI in the same period last year, we expect that the CPI in March may obviously rise to 2.


  3) PPI is expected to pick up in March.
Since March, domestic oil prices have risen, steel prices have rebounded slightly, coal prices have risen first and then decreased, and the prices of means of production have risen as a whole.

7%, PPI is expected to increase 0 in March from the previous month.

4%, PPI rose to 0 in March.


  4) Pay attention to the rebound of the Democratic Party.
Although prices were sluggish in the first two months of the year, CPI replaced 1 in February.

5%, PPI remains at 0.

1% low.

However, pig prices have risen sharply since March, coupled with oil prices, steel prices have also increased significantly. We expect that CPI and PPI will rebound significantly in March, and CPI may rise to about 3% in April. It is worth watching.

  3. Liquidity: It is difficult to be more accommodative in the short term. 1) Currency interest rates continue to rise.

Currency interest rates picked up substantially last week, with the average R007 rising 31bp to 2.

89%, with an average R001 of 39bp to 2.


DR007 upstream is 17bp to 2.

71%, DR001 upstream 39bp to 2.


  2) Black people return to their cages again.

Last week, the budget for reverse repurchase was 110 billion yuan, reverse repurchase was terminated by 20 billion yuan, reverse repurchase net investment was 90 billion yuan, MLF was due to withdraw 327 billion yuan, and open market net withdrawal was 237 billion yuan.

  3) The exchange rate remains stable.

The US dollar index fluctuated last week, and the yuan remained stable against the US dollar, with the onshore and offshore yuan stable at 6, respectively.

71, 6.


  4) It is difficult to be more relaxed in the short term.

A preliminary questionnaire survey released last week showed that the macroeconomic heat index and order index of the indicators in the first quarter were all lower than those in the last four quarters; the residents’ income and employment feeling indexes have rebounded, but prices are expected to decline; and bankersThe macroeconomic 深圳桑拿网 confidence index and loan demand index rebounded.

Although the current economy and prices are still weak, the large increase in pig prices will push up short-term fluctuations, and liquidity may be more difficult in the short term.

  Fourth, the policy: to ensure that the tax burden is only reduced but not increased 1) to ensure that the progressive development goals and tasks are completed.

The Premier of the State Council hosted an executive meeting of the State Council on March 20 to determine the division of responsibilities in the “Government Work Report”, focus on sternly and complete the development goals and tasks; clarify supporting measures to reduce tax reductions;Polluting third parties. Third-party companies grant recognition benefits.

  2) Budget tax reduction is officially implemented.

The Ministry of 杭州桑拿网 Finance, the State Administration of Taxation, and the General Administration of Customs jointly issued the “Announcement on Policies for Deepening Reform and Reform”. Since April 1, substitute taxable sales activities or imported goods have been substituted for ordinary taxpayers. The original 16% tax rate applies.The tax rate was adjusted to 13%; if the original 10% tax rate was applied, the tax rate was adjusted to 9%.

  3) Ensure that the tax burden is reduced or not increased.

The Premier of the State Council went to the Ministry of Finance and the State Administration of Taxation to review and in-depth study the latest progress of larger-scale tax reductions.

During the inspection of the Ministry of Finance, it was pointed out that finance is the mother of government and business is the foundation of finance.

We must be good at using levers to leverage economic transformation, improve people’s livelihood, and increase consumption.

In the specific implementation process of deepening reforms, we must ensure that the tax burden of major industries is significantly reduced, the tax burden of some industries has been reduced, and the tax burden of all industries has only been reduced or not increased.

Let the real money of tax cuts really fall into the pockets of enterprises.

  V. Overseas: The Fed’s interest rate meeting has a lot of pigeons, the euro zone’s March PMI hit a new low. 1) The Fed’s March interest rate meeting has a lot of pigeons.

Last Wednesday, the Fed ‘s March interest rate meeting decided to keep the federal funds target interest rate unchanged. The bitmap showed that most members believe that there will be no interest rate increase in 2019 and one rate increase in 2020. At the same time, the Fed announced a plan to reduce its balance sheet.The limit on the scale of monthly government bond reductions has been reduced from US $ 30 billion to US $ 15 billion beginning in May, and the contraction will end by the end of September this year.

Powell is still positive on the outlook for the US economy this year, but acknowledges that some data has grown rapidly and is patient with raising interest rates.

Under economical reasonableness, the yields of 3-month and 10-year U.S. Treasury bonds reversed last Friday, the first time since 2007 that the three major US stock indexes fell more than 1.

5%, international oil prices fell more than 1%.
  2) Eurozone manufacturing PMI hit a new low in March.

Eurozone ‘s March manufacturing PMI, announced last Friday, is further broken down to an initial value of 47.

6. A new 69-month low.

The German March manufacturing PMI was announced on the same day at 44.

7, hit a 79-month low, was below the rising and falling line for the third consecutive month, and the French manufacturing PMI was 49 in March.
8, also lower than expected.

Affected by weak economic data and loose expectations of global monetary policy, German 10-year government bond yields fell below zero last Friday, the first time in October 2016.

  3) The European Union agrees to a pre-Brexit deadline.

On Thursday, the European Union agreed to extend the Brexit deadline to April 12.

According to the European Union’s preliminary budget, if the British Parliament approves the government ‘s Brexit agreement next week, the EU will agree to contradict the Brexit day originally scheduled for March 29 to May 22, otherwise the UK must decide before April 12.Is there a no-deal Brexit or a request for further extension.

  4) South Korea’s foreign trade remains sluggish.

On Thursday, South Korea announced a decrease in exports from March 1 to 20.

9%, four consecutive months of decline, but the decline was narrower than the previous month, while imports fell by 3.

4%, the decline continued to expand.

At the end of March 19, 19, South Korea entered and departed at an interval of 6.

0% and 7.

8%, the figures for the same period last year increased by 15.

2% and 11.


South Korea ‘s contraction in exports in March was mainly dragged down by exports to the Middle East, Japan and China. Chip exports fell by 25% and petroleum products exports fell by 11.