<News Alert> China cuts RRR for banks by 25bps effective from Apr 25
What’s new
- PBOC announced on Apr 15 to cut RRR ratio by 25bps for all financial institutions except for those already enjoy a 5% RRR. This will release Rmb 530bn of long-term liquidity.
- For city commercial banks that do not have cross-provincial business and rural commercial banks that have an RRR of more than 5%, they are entitled to an additional cut of 25 bps.
- The weighted average RRR for financial institutions will be lowered to 8.1% after the cut
Our view
- This is the first RRR cut in 2022, following the 50bps RRR cut in Dec 2021. While the move is expected by the market, the extent of cut is less than expected this time.
- We expect more loosening policy including further RRR and interest rate cut in the coming quarters for the 5.5% GDP growth target to be achieved.
- Positive to loan growth and economy recovery when China faces challenges from Omicron spread, Ukraine crisis and a weak property market. Positive to banks’ loan growth and cost.
- This is also positive to China brokers as the liquidity injection is considered welcome by the equity market and helps to lift market sentiment/trading activities. Within China brokerage sector, we like CICC (3908 HK) and GF (1776 HK).
Weighted average of China RRR