5th row raising the deposit reserve ratio impact on the stock market Money Tips

Category: Money tips Release Date: 2006-03-07

Author: Wenyuan Pavilion

Row 4 times this year, raising the deposit reserve ratio, the monetary policy tools and frequent application of rarely seen in recent years. However, in a situation of excess liquidity, the current slightly raising the deposit reserve ratio are "appropriate fine-tuning" does not belong to policy "drastic medicine." The statutory reserve is a traditional one of the three monetary policy tools, is mandatory for commercial banks, central bank deposits a certain percentage of reservations in accordance with liquidity. Raising the deposit reserve rate to commercial banks to freeze funds to curb the excessive growth of bank credit funds. In recent years, China's banking system, there are continuing, and continue to accumulate excess liquidity. This situation is mainly due to a serious imbalance in international payments, the central bank through Waihuizhankuan channels, passive, to the banking system put a lot of the base currency. To control the excessive growth of money and credit, monetary policy operations of the main problems facing the banking system is how to hedge the excess liquidity. To raise the deposit reserve ratio to adapt to the dynamic changes of the current liquidity in order to consolidate the effectiveness of regulation. Tomorrow is the last trading day before the holiday market, policy, Sun announced that, in fact, the central bank's intentions to consolidate it with the capital market policy separates to avoid impact on the stock market. This is a good trend. On the other hand, tomorrow is the last working day before the holiday, and policies adopted for other aspects of the impact can be buffered during the festive season. The increase will not have any impact on the stock market, because liquidity big enough. The deposit reserve ratio by 0.5 percentage points, would be able to freeze about 140 billion base currency; now on the market this excess capacity of about 100 million in 4000-6000. The deposit reserve ratio increase, short-term impact on the A-share market of less powerful, or even due to lower than expected rate hike, but may be part of the funds considered to be advantage of this opportunity. The central bank announced before choosing 51 holiday will help the market to fully digest this information.

With the escalation of this bull run, the stock market in the high-speed flow of funds has also become clear that the current bank non-performing loan rate is an important factor, therefore, the State address this issue on many occasions to increase supervision of the area, thereby from the side of non-legitimacy of the need for capital to control the flow;, but only for a similar initiative launched by the allocation of funds policy control, but not in full swing for the current phase of the stock market storm; from bank reserves on several occasions prior to the increase of with the operation of the stock market observation, this does not impact on the stock market and impact, because this is not the stock market rose for the purpose of a regulation, instead of the stock market continued to maintain the healthy operation of high stability has provided a guarantee, so in the current stock market is in a round of the bull market of the market context, control policies such as these may be only on the surface only for the individual events associated with the stock market or the plate side effects of short-lived moment, but will not have the market after a steady upward trend based on the current ongoing running, in essence, result in any adverse negative impact.

At present the biggest capital market is bad: state foreign exchange investment company is expected to set up, this is considered China's Temasek companies (provisional name "Link Company"). "The link Company" formation, is the major event on the foreign exchange management, but also countries in addressing the problem of excess liquidity in a big move. Now, this matter are proceeding with the impact on the stock market, it should be said that there had not been effectively reflected. However, as an investor, have the need to take precautions, do serious research to ignore the impact of the view that it is not rational. Once the state foreign exchange investment company established to issue the equivalent of domestic institutions, from 200 billion to 250 billion U.S. dollars in bonds, in fact withdrawn from circulation of the yuan about 1.548 trillion to 1.935 trillion yuan, its effect is equivalent to 250 basis points increase the statutory reserve ( As a rule, which requires 10 times to improve the operation of the reserve ratio), or roughly a year in 2006 to absorb the additional purchase, which the role of liquidity for the compression is very large. The state foreign exchange investment company's information, we must pay close attention.