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Economy

Strong Credit Data to Reprice Easing Expectations

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-->Strong Credit Data to Reprice Easing Expectations

 

Money growth rebounded strongly

  • M2 growth jumped by 0.6pp to 8.6%YoY in Mar, much higher than market expectations (Citi/Mkt: 8.2%YoY). The corporate demand for credit seemed to have improved and thereby facilitated the process of money expansion. Meanwhile, M1 growth passed the low point in Jan and continued to advance from 2.0% in Feb to 4.6% in Mar. The corporate sector’s cash flows have been recovering well after the CNY. 

 

New RMB loans far exceeded expectations

An RMB1.69trn increase in bank lending beat market expectations significantly (Citi/Mkt: RMB1.3/1.25trn).  Corporate appetite for credit seems to be recovering. New bill financing almost halved to RMB97.8bn after the regulator moved to curb bill arbitrages earlier.

 

New TSF more than tripled as non-bank financing also improved

  • New TSF posted RMB2.86trn in March vs RMB703bn in February, RMB1trn more than expected (Citi/Mkt: RMB1.8/1.85trn). Growth in outstanding TSF quickened by 0.5pp to 10.6%YoY in March. Adding local government bonds, adjusted TSF growth advanced by 0.6pp to 11.7%YoY.
  • The broad credit impulse seemed to have sustained the recovery since January. Besides strong bank lending, total off-balance sheet lending increased by RMB82.4bn in March vs -RMB364.9bn in February while corporate bond financing increased by RMB327.6bn vs RMB80.5bn in February. In the meantime, special local government bond issuance rose to RMB253.2bn vs RMB177.1bn in February.

 

The strong financial data with improved structure points to a recovery of credit demand and may lower the chance for near-term easing moves

  • The PBoC made a series of efforts to support growth in December and January, including the launch of TMLF and uts to RRR. That broad credit growth has bottomed out strongly shows that the monetary apparatus is working. Meanwhile, financial conditions seem to have loosened substantially year to date due to strong equity performance.
  • In the view of Citi analysts, the current priority for the PBoC is to enhance policy transmission and channel existing liquidity within the banking system to the real economy, especially SMEs and POEs, while outright easing efforts can be delayed. Citi analysts tend to think the PBoC will use other tools rather than a RRR cut to replenish liquidity when a sizable RMB367bn in MLF expires on Apr 17th.
  • Over the medium term, the likelihood for more aggressive moves like interest rate cuts has also declined. Other than the steady economic growth, rising inflationary pressures may also constrain the policy room. No benchmark interest rate cuts have ever come during an upswing of CPI inflation. 

 

 

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MARKET SPECIFIC DISCLOSURES

Market Specific Disclosures

Hong Kong: This communication is distributed in Hong Kong by Citibank (Hong Kong) Limited ("CHKL") and/or Citibank, N.A., Hong Kong Branch (“CBNA HK”, Citibank, N.A. is organized under the laws of U.S.A. with limited liability). CHKL and CBNA HK provide no independent research or analysis in the substance or preparation of this communication. Although information in this communication has been obtained from sources believed to be reliable, CHKL and CBNA HK do not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from its use.

This communication is for general information only, is not intended as a recommendation or an offer or solicitation for the purchase or sale of any products or services and should not be relied upon as financial advice. The information herein
has not taken account of the objectives, financial situation or needs of any particular investor. Any person considering an investment should consider the suitability of the investment having regard to their objectives, financial situation and needs,
and should seek independent advice before making an investment decision. You should obtain and consider the relevant product terms and conditions and risk disclosure statement, and consider if it’s suitable for your objectives, financial situation or needs before making any investment decision. Investors are advised to obtain independent legal, financial and taxation advice prior to investing. Investments are not deposits, are not protected by the Deposit Protection Scheme in Hong Kong
and are subject to investment risk including the possible loss of the principal amount invested.

This communication does not constitute the distribution of any information in any jurisdiction in which it is unlawful to distribute such information to any person in such jurisdiction.

CHKL does not provide discretionary portfolio management services.

Singapore: This communication is distributed in Singapore by Citibank Singapore Limited (“CSL”) to selected Citigold/Citigold Private Clients. CSL provides no independent research or analysis of the substance or in preparation of this communication. Please contact your Citigold/Citigold Private Client Relationship Manager in CSL if you have any queries on or any matters arising from or in connection with this communication. Investment products are not insured under
the provisions of the Deposit Insurance and Policy Owners’ Protection Schemes Act of Singapore and are not eligible for deposit insurance coverage under the Deposit Insurance Scheme.

This communication is for general information only and should not be relied upon as financial advice. The information herein has no regard to the specific objectives, financial situation and particular needs of any specific person and is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Any person interested in the strategies or concepts mentioned herein should consult their independent tax, legal, financial or other advisors,
as appropriate. This communication does not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution or offer is not authorized or to any person to whom
it is unlawful to distribute such information or make any offer or solicitation.

Before making any investment, each investor must obtain the investment offering materials, which include a description of the risks, fees and expenses and the performance history, if any, which may be considered in connection with making
an investment decision. Interested investors should seek the advice of their financial adviser about the issues discussed herein as appropriate. Should investors choose not to seek such advice, they should carefully consider the risks associated
with the investment and make a determination based upon the investor’s own particular circumstances, that the investment is consistent with the investor’s investment objectives and assess whether the investment product is suitable for
themselves. Although information in this document has been obtained from sources believed to be reliable, CSL does not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from Its use.

CSL does not provide discretionary portfolio management services.

UAE: This document is distributed in UAE by Citibank, N.A. UAE. Citibank N.A. UAE is licensed by UAE Securities and Commodities Authority (“SCA”) to undertake the financial activity as Promoter under license number 602003.

Citibank N.A. UAE is registered with Central Bank of UAE under license numbers BSD/504/83 for Al Wasl Branch Dubai, 13/184/2019 for Mall of the Emirates Branch Dubai, BSD/2819/9 for Sharjah Branch, and BSD/692/83 for Abu Dhabi Branch.

This is not an official statement of Citigroup Inc. and may not reflect all of your investments with or made through Citibank. For an accurate record of your accounts and transactions, please consult your official statement. Before making any investment, each investor must obtain the investment offering materials, which include a description of the risks, fees and expenses and the performance history, if any, which may be considered in connection with making an investment decision. Each investor should carefully consider the risks associated with the investment and make a determination based upon the investor’s own particular circumstances, that the investment is consistent with the investor’s investment objectives.
At any time, Citigroup companies may compensate affiliates and their representatives for providing products and services to clients.

United Kingdom: This document is distributed in the U.K. by Citibank UK Limited and in Jersey by Citibank N.A., Jersey Branch.

Citibank UK Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Our firm’s Financial Services Register number is 805574. Citibank UK Limited
is a company limited by shares registered in England and Wales with registered address at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, Companies House Registration No. 11283101.

Citibank N.A., Jersey Branch is regulated by the Jersey Financial Services Commission. Citi International Personal Bank is registered in Jersey as a business name of Citibank N.A. The address of Citibank N.A., Jersey Branch is P.O. Box 104, 38 Esplanade, St Helier, Jersey JE4 8QB. Citibank N.A. is incorporated with limited liability in the USA. Head office: 399 Park Avenue, New York, NY 10043, USA.

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