Analyst
Analyst
New Loans Turn Negative, New TSF Lifted By Bond Issuance
July's M1 growth held flat at 4.0% yoy, marginally above Bloomberg's consensus estimate of 3.9% yoy, while M2 growth eased to 7.7% yoy (-0.3ppt mom), below consensus of 7.9% yoy and the slowest M2 pace since Mar 25.
New bank loans turned negative at -Rmb0.34t, the largest monthly net repayment on record and below consensus estimate of -Rmb0.1t. New TSF of Rmb1.40t beat the Rmb1.09t consensus estimate, but was driven by government and corporate bond issuance rather than bank credit.
Outstanding bank loans growth slipped to 5.1% yoy (-0.1ppt mom), a record low, while outstanding TSF growth held at 7.4% yoy. With bank credit contracting and non-bank channels carrying the load, the government must look beyond monetary easing to lift domestic demand.
Our View
M2 growth eased further by 0.3ppt to 7.7% yoy in Jul 26, below Bloomberg's consensus forecast of 7.9% yoy. M1 money supply growth held at 4.0% yoy, marginally above market expectations of 3.9% yoy, while M0 growth moderated to 11.6% yoy (-0.2ppt mom). The narrowing gap between M1 and M2 growth reflects slower broad money expansion rather than a pick up in transactional demand for money, which remains subdued.
Banks recorded a net reduction of Rmb0.34t in new loans in Jul 26, reversing Jun 26's Rmb1.61t and missing Bloomberg's consensus estimate of -Rmb0.10t. This marks the largest monthly contraction on record. New household loans fell to -Rmb0.46t (-Rmb0.72t mom), with both short term and long-term borrowings in negative territory. New corporate & government loans turned negative at -Rmb0.10t (-Rmb1.46t mom), dragged by short-term (-Rmb1.07t mom) and medium-to-long term (-Rmb0.79t mom) loans. Bills financing rose to Rmb0.38t (+Rmb0.26t mom) and provided the only meaningful support.
Jul 26's new TSF fell to Rmb1.40t from Jun 26's Rmb3.37t, but beat Bloomberg's consensus of Rmb1.09t. The beat was driven by non-bank channels, as renminbi loans within TSF contracted Rmb0.59t. New government bond issuance rose to Rmb1.32t (+Rmb0.55t mom), though on a stock basis, its growth edged lower to 14.1% yoy (-0.1ppt mom). Corporate bond growth accelerated to 9.2% yoy (+0.3ppt mom) and equity issuance rose to 5.5% yoy (+0.5ppt mom), while bank acceptances turned positive at 2.7% yoy (+5.5ppt mom), consistent with the continued substitution away from bank credit.
Outstanding bank loans growth slipped to 5.1% yoy (-0.1ppt mom) in Jul 26, marking another record low, while outstanding TSF growth was unchanged at 7.4% yoy, with the widening gap reflecting greater reliance on government led issuance. The PBOC left the one-year and five-year LPRs unchanged at 3.00% and 3.50% on 20 Jul 26, its 14th consecutive hold. Going forward, with credit demand rather than funding costs the binding constraint, the government must look beyond monetary easing to lift domestic demand.
New Loans Turn Negative, New TSF Lifted By Bond Issuance
July's M1 growth held flat at 4.0% yoy, marginally above Bloomberg's consensus estimate of 3.9% yoy, while M2 growth eased to 7.7% yoy (-0.3ppt mom), below consensus of 7.9% yoy and the slowest M2 pace since Mar 25.
New bank loans turned negative at -Rmb0.34t, the largest monthly net repayment on record and below consensus estimate of -Rmb0.1t. New TSF of Rmb1.40t beat the Rmb1.09t consensus estimate, but was driven by government and corporate bond issuance rather than bank credit.
Outstanding bank loans growth slipped to 5.1% yoy (-0.1ppt mom), a record low, while outstanding TSF growth held at 7.4% yoy. With bank credit contracting and non-bank channels carrying the load, the government must look beyond monetary easing to lift domestic demand.
Our View
M2 growth eased further by 0.3ppt to 7.7% yoy in Jul 26, below Bloomberg's consensus forecast of 7.9% yoy. M1 money supply growth held at 4.0% yoy, marginally above market expectations of 3.9% yoy, while M0 growth moderated to 11.6% yoy (-0.2ppt mom). The narrowing gap between M1 and M2 growth reflects slower broad money expansion rather than a pick up in transactional demand for money, which remains subdued.
Banks recorded a net reduction of Rmb0.34t in new loans in Jul 26, reversing Jun 26's Rmb1.61t and missing Bloomberg's consensus estimate of -Rmb0.10t. This marks the largest monthly contraction on record. New household loans fell to -Rmb0.46t (-Rmb0.72t mom), with both short term and long-term borrowings in negative territory. New corporate & government loans turned negative at -Rmb0.10t (-Rmb1.46t mom), dragged by short-term (-Rmb1.07t mom) and medium-to-long term (-Rmb0.79t mom) loans. Bills financing rose to Rmb0.38t (+Rmb0.26t mom) and provided the only meaningful support.
Jul 26's new TSF fell to Rmb1.40t from Jun 26's Rmb3.37t, but beat Bloomberg's consensus of Rmb1.09t. The beat was driven by non-bank channels, as renminbi loans within TSF contracted Rmb0.59t. New government bond issuance rose to Rmb1.32t (+Rmb0.55t mom), though on a stock basis, its growth edged lower to 14.1% yoy (-0.1ppt mom). Corporate bond growth accelerated to 9.2% yoy (+0.3ppt mom) and equity issuance rose to 5.5% yoy (+0.5ppt mom), while bank acceptances turned positive at 2.7% yoy (+5.5ppt mom), consistent with the continued substitution away from bank credit.
Outstanding bank loans growth slipped to 5.1% yoy (-0.1ppt mom) in Jul 26, marking another record low, while outstanding TSF growth was unchanged at 7.4% yoy, with the widening gap reflecting greater reliance on government led issuance. The PBOC left the one-year and five-year LPRs unchanged at 3.00% and 3.50% on 20 Jul 26, its 14th consecutive hold. Going forward, with credit demand rather than funding costs the binding constraint, the government must look beyond monetary easing to lift domestic demand.
Analyst
Analyst
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