China Merchants: There is a high possibility that long-term other assets will increase by 587.5 billion in equity
[Investment strategy]Promote the mystery of “other assets”-View policy Tianxia seventh chapter Zhang Xia Tu Jingqing WeChat account: China Merchants Strategy Research began to enter the era of active currency issuance in 2014, and its investment direction has a key impact on asset prices.
History shows that after the increase of other assets in the long term, A shares tend to rebound significantly; and the increase in other assets coincides with the support cycle of the capital market once every five years and the introduction of new markets.
In December 2018, a series of other assets increased to a record high. If it did not decline significantly or even continue to increase in January 2019, it can be inferred that it has a certain relationship with the capital market policy-friendly period and the launch of the science and technology board.Founding stocks can be more optimistic.
The core point?
In the past 20 years, the method of gradually putting in base currency can be divided into two eras, the era of passive currency placement before 2014 and the era of active currency placement in 2014 and beyond.
The compulsory foreign exchange settlement and sales system implemented before 2011 transitioned to buying foreign exchange, increasing bank deposits, that is, passively issuing base currencies while increasing foreign exchange assets.
Until the end of 2013, foreign exchange assets were the main source of the expansion of the total assets of the transition.
Beginning in 2014, foreign exchange reserves gradually declined. PSL, MLF, etc. have come out one after another. Together with refinancing, reverse repurchase, SLF, etc., they have become the main means of depositing base currencies.
In the era of passive currency issuance, the increase in base currency is directly related to investment and foreign trade. At this stage, macro leverage is effectively controlled.
However, the active issue of currency does not completely correspond one-to-one with trade and investment. If it increases rapidly in the short term, asset price inflation may occur.
For example, 2014?
The increase in currency issuance in 2015 and the injection of stock and bond markets through financial innovation brought both stocks and bonds; in 2016, the currency was gradually issued through PSL, replacing the shed reform and monetization to replace the real estate market, triggering a new round of house price increases.
In December 2018, the long-term balance sheet expanded again. In addition to the increase in “credit claims on other deposit-taking companies” brought about by monetary policy instruments, the increase in “other assets” generated the highest monthly income since 2002.
Average total assets increased by 1 in December.
34 trillion, and other assets increased by 587.5 billion.
The composition of other assets has been initially re-disclosed, but it must not be a debt category, an external reserve category, or a possible divergence in the equity category.
Historically, there have been coincidences in the obvious changes in other assets:
First, coincided with the timing of changes in the registered capital of some companies: the Bank of China and China Construction Bank extended their capital injections in 2003; the Ministry of Finance purchased a change in Central Huijin’s equity in 2007, while other assets fell;After the registered capital of Gold expanded, other assets increased; in December 2018, the newly established “Zhonghui Reserve” investment company under the investment platform of SAFE.
Second, the increase in other assets is often accompanied by the continuous adjustment of A shares. After the increase in other assets, the market often rebounds to varying degrees: from February 2005 to the end of 2005, October 2012, and June to July 2015, the market fell significantly behind.Other assets increased to varying degrees.
Third, coincidence with the five-year policy support cycle of the capital market and the launch of new markets: starting in 1999, the country will issue a more important document supporting the capital market once every five years, and will also launch a new market.
Before and after the issuance of the document, the merger of other assets will expand to varying degrees before the new market is launched.
The initial initiative to issue currency has a significant impact on asset prices, and the direction of investment is likely to be the direction of asset appreciation.
If we see that other assets have not dropped significantly or even continued to increase in January, we can speculate that this has an important connection with the five-year capital market policy-friendly period and the launch of the science and technology board, the stock market can be more optimistic, And the stocks of science and technology are more optimistic.
Risk warning: the expansion of the science and technology board exceeds expectations; the China-US trade pricing results exceed expectations.
01Long-term balance sheet Like all companies, the transition has its own balance sheet.
At present, the total long-term assets (liabilities) have reached 37.
3 trillion yuan.
What does the inflationary balance sheet have to do with what we usually call the money supply?
The preliminary debt account reserve currency accounted for 88% of total debt.
8%. This reserve currency is what we usually call the base currency. Multiplying the base currency by the currency multiplier is equivalent to our general currency M2.
The currency multiplier is approximately equal to the reciprocal of the “statutory deposit reserve ratio + excess reserve ratio”.
Therefore, in theory, by controlling the statutory deposit reserve ratio and reserve currency, the broad money reserve of the whole society can be controlled indirectly.
Of course, the actual broad money supply is also related to factors such as over-reserve rates and cash leakage.
In the past 20 years, the launch of base currency can be divided into two eras, which we call the “passive currency era” and the “active currency era.”
In the era of passive currency issuance before 2011, a mandatory foreign exchange settlement and sales system must be implemented. Enterprises and individuals must sell excess foreign exchange to designated foreign exchange banks. The designated foreign exchange banks must place foreign exchange higher than the position of the State Administration of Foreign Exchange in the interbank market.Sell.
Eventually, it will be bought by the central bank, which will gradually increase the deposits with banks while gradually buying foreign exchange.
Therefore, we can see that the total assets of the monetary authorities have basically increased simultaneously with foreign assets or foreign exchange reserves.
The increase in total assets is almost contributed by foreign exchange reserves.
Absorb foreign exchange initially and passively invest in base currency.
The compulsory foreign exchange settlement and sale system withdrew from the historical stage after 2012, and foreign exchange accounts were still the largest source of total assets in 2013. However, from 2014 onwards, foreign exchange reserves were gradually expanded.
At this time, foreign exchange funds are no longer the source of the base currency, and the era of passive currency is over.
In the era of passive issuance, the increase in foreign exchange 杭州夜网论坛 is directly related to exports and overseas investment, so the increase in the base currency is directly linked to investment and foreign trade.
In this era, the macro-leverage ratio is effectively controlled, and M2 / GDP is 1.
?The era of active currency issuance Since 2014, foreign exchange accounts have gradually declined, and it is difficult to sustain the foreign currency accounts in the base currency.
In 2014, supplementary pledged loans (PSL) and medium-term loan facilities (MLF) came out one after another.
In addition, there are tools such as refinancing, rediscounting and reverse repo.
The essence of these policy tools is to take the initiative to lend money directly to financial institutions to invest in the base currency.
Therefore, in the balance sheet, the “credit claims against other depository companies” on the asset side and the “reserve currency” on the liability side increase simultaneously.
The MLF, PSL, SLF and open market operations of the base currency are basically in line with changes in claims on other depository companies.
Changes in the way base currency is issued are proactively issued from a passive issuance range, and currency issuance does not correspond exactly to trade and investment.
If it increases rapidly in the short term, the likely result is an inflation of asset prices.
In 2014, two rounds of claims on other depository companies increased significantly.
The first round is from September 2014 to May 2015.
At this stage, stocks and bonds all increased significantly.
The Shanghai Composite Index increased from 2200 points in September 2014 to a maximum of 5,000 points, more than doubled, and bond yields also declined.
From 2014 to the first half of 2015, the real estate cycle entered a downward cycle. Infrastructure investment was also average. Manufacturing investment was also in a state of reorganization. The real economy was not well financed. The issue of basic currency was gradually promoted. Under the guidance of financial innovation,This approach entered the stock and bond markets, and ultimately brought “de-entry into the false” and pushed up the price of financial assets.
A stock has a bull market with a purely up-and-down estimate under the fundamental downturn.
Beginning in 2016, a gradual new round of prominent expansion started. In January 2016, PSL increased by one.
9 trillion yuan, the monetization of shed reform accelerated. This round of base currency is represented by the shed reform monetization, which is directed to real estate to achieve the purpose of destocking.
As a result, a new round of house price growth started in 2016, the recovery of real estate starts, overlapping supply side reforms, and commodity prices have increased significantly.
Here is a very famous quote. Friedman once said that inflation is a currency phenomenon everywhere.
In China, it can be understood that when there is a significant increase in currency, the direction to be guided is the direction in which asset prices rise and rise.
In December 2018, the long-term balance sheet expanded significantly again.
In the long-term balance sheet announced on January 16, we observed that the size of the total assets exceeded the significant expansion.
Total asset size increased by 1.
34 trillion, an increase of 3 from the previous month.
7%, the annual growth rate rebounded from negative growth to 2.
MoM growth of 3.
7% is a new high since January 2016.
As before, in December 2018, US $ 740 billion of liquidity was invested through MFL, PSL, and open market operations. As a result, the claims on other deposit-taking companies have gradually increased by US $ 740 billion.
But this time, an opposition anomaly appeared, that is, our protagonist appeared.
The expansion of the expanded balance sheet in December 2018 was closely linked to the expansion of the “Other Assets” account in the balance sheet.
Other assets increased by 587.5 billion in December 2018, the highest value since 2002.
The initial surplus of other assets reached 2.
3 trillion, accounting for 6% of total long-term assets.
We have seen that the increase in “other assets” in the single month at the beginning of the year and the increase in “debt to other depository companies” have reached very close orders of magnitude.
It is no longer possible to proceed with this variable.
02 The mystery of merging “other assets” recombined the composition of excess other assets. Because of the relatively low proportion of the balance sheet before reorganization, few researchers have studied this project.
But other assets must not be creditor’s rights, external storage, and the possibility of property rights to penetrate.
One change that can be reasonably estimated using public information is a significant increase in other assets in 2003 and a significant decrease in 2007.
In December 2003, the Central Bank invested US $ 45 billion in foreign exchange reserves to inject Bank of China and China Construction Bank. The balance sheet of the monetary authority was reflected in the decrease in “foreign exchange assets” and the increase in “other assets” under the asset project.
In September 2007, the Ministry of Finance issued special treasury bonds, purchased all the equity of Central Huijin from the People’s Bank of China, and injected them into CIC as part of its investment in China Investment Corporation.
The transaction was completed in December 2007. During the month, the “other assets” item of the balance sheet assets of the People ‘s Bank of China plummeted from 11979 figures in November to USD 709.8 billion in December, a decrease of USD 488.1 billion.The current exchange rate is about 67 billion U.S. dollars.
From a coaxial perspective, this operation has increased foreign exchange by nearly 23 billion.
Complete a perfect low suction high throw.
It is difficult to find a reasonable explanation for other asset changes since then.
However, through various information comparisons, we found that from 2012 to 2017, the increase in other assets coincided with the expansion of the registered capital of China Securities Finance Corporation.
Around December 2018, the registered capital of CSI Gold did not increase.
However, in December 2018, the Indus tree investment platform affiliated to the State Administration of Foreign Exchange established a new investment company called “Zhonghui Reserve” with a registered capital of 5 billion.
The company has no public investment scope.
The events in the icon below may have coincidences in time. Other asset expansions and the government’s support cycle for the capital market may also coincide.
Beginning in 1999, the country will issue a more important document in support of the capital market every five years, and will launch a new market.
Before and after the issuance of the document, before the new market is launched, the merger of other assets will expand to varying degrees.
It’s a bit like escorting new markets.
Of course, we do not have any evidence to prove that there is an inevitable connection between these things, we can only objectively describe the chronological order of these things.
In December 2003, long-term other assets increased significantly. On January 30, 2004, the State Council issued several opinions on promoting the reform, opening up and stable development of the capital market. In May 2004, the small and medium-sized board was launched.
In May 2009, long-term other assets increased slightly by 80 billion yuan. In October 2009, the GEM was officially launched.
From December 2013 to May 2014, the consolidated assets increased significantly again. In May 2014, “Several Opinions of the State Council on Further Promoting the Healthy Development of the Capital Market” was released. In October 2014, the Shanghai Stock Connect was launched.
In December 2018, long-term other assets increased significantly again. In 2019, the science and technology board promoted the launch.
In addition to the above coincidences, the growth of other assets has increased and is obviously characterized by the trend against the market. Changing the increase in other assets is often accompanied by the continuous adjustment of A shares.
For example, from February 2005 to the end of 2005, October 2012, and June-July 2015, the market fell significantly behind, causing other assets to increase in varying degrees.
After other assets increase, the market often rebounds to varying degrees.
In December 2018, the long-term “other assets” increased significantly. Since January, the rebound rate of the Shanghai Stock Exchange Index has exceeded 10%.
We wrote reports in January and February to remind us of this, referring to “The Potential Impact of Unexpected Behavior” Changes “on A Shares” and “Bath Spring, Focus on Science and Technology.”
Inflation is often a currency phenomenon. We can speculate that after the era of passive currency issuance, the gradual and active issue of currency has a key impact on asset prices, and the direction of progressively promoting currency is likely to be the direction of asset appreciation.
In general, the growth of other assets in the asset class of previous assets has become an important component of the increase in asset assets.
History shows that the increase in a series of other assets coincides with the A-shares in time. After the increase in a series of other assets, the A-shares tend to rebound significantly.
There is also a coincidence in time between the increase in other assets, the support cycle of the capital market once every five years, and the launch of new markets.
If we see that other assets have not dropped significantly or even continued to increase in January, we can think that this has an important connection with the capital market policy friendly period and the launch of the science and technology board once every five years., And the stocks of science and technology are more optimistic.
- End –