Since the second half of last year, LPR has been adjusted several times, especially in the first half of this year. The pace of adjustment should be relatively fast. Obviously, this was related to the market environment at that time. Affected by the novel coronavirus pneumonia, a period of time in the beginning of this year, domestic economic activities encountered great difficulties. Many enterprises were in a state of not functioning normally. At that time, the LPR was cut down in time, laying a solid foundation for commercial banks to substantially lower the interest rate of loans, and playing a positive role in promoting the real economy to go out of the trough.
In other words, the downward trend of LPR also makes investors see the basic trend of market interest rate fall, which also has the role of guiding private funds to flow to the stock market to a certain extent. Some time ago, there are many reasons for the increase in the price of the stock market, but we cant help saying that the LPR reduction also played a certain role.
In July this year, the central bank announced that it would cut the refinancing and rediscount interest rates for commercial banks, which was regarded as a signal by many market participants that the central bank would cut the benchmark interest rate for deposits and loans of financial institutions. Affected by this, the stock market once showed an accelerated upward trend. But then it was found that as an important reference for the trend of short-term interest rates, LPR did not adjust.
What does that mean? First of all, the central banks reduction of refinancing and rediscount interest rates is not to prepare for a comprehensive reduction of interest rates, but only to reduce the burden of commercial banks; secondly, based on the fact that the real economy has begun to recover, financial support for the economy is more reflected in the use of quantitative means to meet the demand for scale, rather than focusing on stimulating the formation of new demand through price means, which is to guard against low efficiency At the same time, it is also necessary to ensure the normal capital price system and realize the basic balance of supply and demand.
In this sense, LPR remained unchanged for six consecutive months, while the loan balance of commercial banks and the scale of social financing continued to maintain a rapid growth, which actually reflects the current direction of monetary policy.
So, what is the significance of such a guidance for the stock market? To put it simply, in the first half of this year, the situation that social funds entered the stock market on a large scale due to the reduction of market interest rate is not visible at least at present. Therefore, the stock market rising market driven by liquidity has come to an end.
By the way, judging from the current economic situation, it is unlikely that the LPR will be lowered in the near future, and certainly not likely to rise. Investors in the operation, may as well have more thinking about such a pattern.