Financial data in June: Deleveraging continues, and the trend of structural transfer of residents’ savings continues (Morgan Stanley)
A Morgan Stanley report pointed out that China's social financing growth rate dropped to 7.4% in June, and the RMB loan growth rate dropped to 5.3%, indicating that the deleveraging trend continued.
A Morgan Stanley report pointed out that China's social financing growth rate dropped to 7.4% in June, and the RMB loan growth rate dropped to 5.3%, indicating that the deleveraging trend continued. New loans to residents and businesses both declined year-on-year, while government bond issuance remained the core driver of social financing growth. The interest rates on new corporate loans and mortgage loans by banks have diverged, and credit growth has been rationalized. This means that the expansion of bank assets has slowed down, and the new credit structure is biased toward the government, putting pressure on cyclical assets that rely on credit. The market had expected credit growth to slow down, but June data further confirmed the trend. The key logic behind it is that the financial system is undergoing "healthy deleveraging" and the social financing growth rate has returned to a more sustainable mid-term level of about 6%. This will be beneficial to the long-term stability of the financial system, but its short-term support for economic growth will weaken. One-sentence conclusion: June credit data shows that the "deleveraging" process is deepening, private sector demand is weak, and the government has become the main force in increasing leverage, which has a structural impact on bank asset quality and economic growth. Positive/negative: Positive for the long-term stability of the banking sector, negative for cyclical industries and real estate sectors that rely on credit expansion. The current "deleveraging" expectations have been digested by the market, but continued credit weakness is still a suppressing factor. Catalysts: 1) whether the July Politburo meeting will release more positive signals for credit expansion; 2) whether the pace of government bond issuance will accelerate significantly in the coming months.