Niu Wenxin: What Is The Effect Of The Interest Rate Cut In The Stock Market?

On the evening of February 28th, the central bank announced that it had lowered the RMB lending and deposit benchmark interest rates of financial institutions by 0.25 percentage points since March 1st.

Many market participants say that the rate reduction effect on the stock market is limited, at least far less than the last (November 24, 2014) stimulus.

But I believe that the biggest role of the rate cut on the stock market is to block the adjustment space.

People who understand technical analysis are very clear that before the Spring Festival, China's stock market has entered a round of adjustment of the weekly level, and in the adjustment of the weekly line level, a Japanese line level rally has made the A shares (Shanghai stock index [1.89%]) appear to have a "two high point" form.

If there is no good news to stimulate, as long as once again a downward adjustment, it will be very easy to be understood by the market as "Ma Tou" appears, the adjustment will increase.

However, with the stimulus of interest rate cut and the stimulation of PMI data slightly improved, the adjustment of this week's weekly level will no longer panic, at least the probability of completing the adjustment will be increased at least.

But the problem is not in the stock market, but in the money market.

In recent years, money market interest rates have been hovering above 4%.

If the interest rate of money market can not be reduced to the interest rate near the deposit rate, the currency speculation will make the central bank's interest rate policy greatly reduced.

Because the decline in deposit interest rate will increase the interest rate difference between deposit interest rate and money market interest rate, thereby increasing the speculative profit of currency.

Before the Spring Festival this year, the speculative yield of currency was as high as 5%.

This is a very bad phenomenon. It will make the capital flow out of the deposit market and flow to the currency speculation market.

Thus the loan availability of the real economy will be affected, at least the loan interest rate will be raised, and the pmission of monetary policy will be a problem.

The author thinks that China

The problem is not the total amount of money, but the problem of financial structure. It is the problem of short term finance. It is the problem that finance can not effectively form capital. It is a problem that can be used in the long term funds of the real economy less and less. On the contrary, there are too many financial arbitrage funds and too much short-term funds.

The more short-term funds are, the more serious the mismatch of deposit and loan period is; the more serious the mismatch between loan and deposit maturity, the greater the demand for short-term funds.

This is also the key reason for the high interest rate in the money market.

Some people say that speculation in the stock market is not arbitrage. Right, but this arbitrage is not the same.

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Arbitrage is the difference between the stock price and the stock price. This is the process that capital pricing must go through. Without the frequent and effective trading of stocks, capital prices can not be formed, and the value of listed companies can not be fully reflected.

But interest rate speculation in China's money market is totally different. It does not help interest rate pricing, but distorts interest rate pricing.

In developed countries, interest rate speculative arbitrage usually has only a few or more than a dozen basic points arbitrage space.

Arbitrage not only requires very high technical capabilities, but also requires dozens of credit levers.

China's interest rate speculation is the arbitrage of general deposits into interbank deposits, and there are hundreds of basic risk free interests at every turn.

If a competent foreigner makes big levers from abroad, and then through some channels to exchange Renminbi for interest rate speculation and currency speculation, the risk free yield will reach hundreds of per hundred per year.

On the surface, they are drinking on the financial body, but these interests must be paid by the real economy. Can such financial costs support the growth of the real economy?

Therefore, money market interest rates must be depressed now.

If the interest rate of the deposit is lowered and the interest rate of the money market keeps high, it will create too big risk free interest for currency speculation and interest rate speculation. Then, who will finance the nutrition of China? Of course, it is not industry, but currency speculation.