1. What is LPR? LPR is spelled Loan Prime Rate in English and loan prime rate in Chinese, which is also called loan market quotation.
By definition, everyone should know that it belongs to the loan interest rate, but the formation of this interest rate is different from that of the bank. 18 commercial banks quote according to the bank's high-quality customer loan interest rate, and the central bank comprehensively adds points according to the MLF interest rate, finally forming the current LPR interest rate.
LPR has two terms, one is 1 year, and the other is 5 years. It can also be understood that 1 year is short-term interest rate and 5-year is long-term. Its base point takes 0.05 percentage point as a step, which increases and decreases, that is, it floats with 0.05 percentage point as the base every time, and the amplitude is a multiple of 0.05 percentage point.
The quotation time of LPR was originally announced at 9: 30am on the 20th of each month, but since the 20th of this year, this quotation time has been adjusted to be released in advance, that is, at 9: 15 on the 20th of each month. Although it is only 15 minutes in advance, it is good for the stock market, futures and foreign exchange. Announcing the quotation of LPR before the opening can give you some preparation time and reduce the interference to the market.
LPR quotation, 20 19 August ago, there were 10 banks participating in the quotation, and then 8 banks were added. The customer groups served by these banks are mainly small and micro enterprises, and two private banks have been added. The 18 companies are: China Industrial and Commercial Bank, China Agricultural Bank, China Bank, China Construction Bank, Bank of Communications, China CITIC Bank, Shanghai Pudong Development Bank, Industrial Bank, China Merchants Bank, Minsheng Bank, Xi 'an Bank, Taizhou Bank, Shanghai Rural Commercial Bank, Guangdong Shunde Rural Commercial Bank, Standard Chartered China, Citibank, Shenzhen Qianhai Weizhong Bank and Zhejiang Online Commercial Bank. Judging from the increase in the quotation list, the central bank has fully considered the support for small and medium-sized enterprises, making the coverage and application more extensive.
Another important reason why LPR has attracted everyone's attention is that since August 2020, five state-owned banks, namely ICBC, CCB, ABC, BOC and Postal Savings Bank, have synchronized the interest rate of individual housing loans with the LPR interest rate.
Therefore, whether from the perspective of personal loans or corporate loans, the monthly interest rate of LPR is more concerned. From the perspective of the stock market, interest rate changes will have an impact on market expectations and confidence, and after LPR is widely used, it will naturally have a certain impact on the stock market.
2. Why did the central bank "double down" this time? LPR is the benchmark interest rate in the central bank's monetary policy, and the central bank's toolbox also includes the statutory reserve ratio, reverse repurchase and discount interest rates. LPR started to establish a centralized quotation and release mechanism from 20 13 to 10, but the new policy was implemented from 20 19 to 8, so the quotation of LPR from 20 19 is of greater reference value to the market.
In the latest LRR interest rate quotation, since August 20 19, there have been four "LPR double declines" * */the interest rate of both one-year and five-year LPR declines still remains at 2: 1, and the decline rate of five-year LPR will generally not exceed that of 1 year LPR. This "double drop" is the first "double drop" after April 2020 and 16 months.
Moreover, this time, the central bank's "LPR double decline" first lowered the bid-winning interest rates of MLF (medium-term lending convenience operation) and open market reverse repurchase operation by 10 basis point, and at the same time adopted the "double decline" of 1 period and LPR 5 period, indicating its attitude of easing policy.
In the face of continuous interest rate cuts by the central bank, its role can be summarized as four points here:
1) Under the downward pressure of the economy, it is necessary to reduce the burden on enterprises and meet personal consumption needs.
2) For small and medium-sized micro-subjects, through loose signals, market expectations can be reversed and demand recovery in the real economy can be stimulated.
3) To hedge the Fed's interest rate hike in 2022, we should "give priority to stability" and reduce the influence of external factors.
4) For the banking system, we can increase the integration of cross-month funds.
Of course, from the perspective of the stock market, the central bank's interest rate cuts are also encouraging the market.
3. What are the impacts on individuals and enterprises? After understanding the basic nature of LPR, we will understand that the interest rate of LPR has a certain impact on the capital flow of our individuals and enterprises.
In our life, 1 year LPR is applicable to all loans within 5 years, and 5-year LPR is applicable to loans over 5 years, and the same is true for enterprises.
1 year LPR mainly affects personal short-term consumption and corporate short-term loans. For individuals, five-year LPR is a mortgage, and for enterprises, there are long-term loans and investment loans in manufacturing. Therefore, the market pays more attention to the 5-year LPR. 1 year, the double drop of LPR is 0. 1%, which is helpful to promote our personal short-term consumption demand; A five-year decline of 0.05% is also good for personal loans and corporate loans.
For real estate, the policy basically means bottoming out. On the basis of "housing without speculation", it also stabilized a certain real estate price. For housing enterprises, their investment and new willingness to start work can be activated; For buyers, the reduction of mortgage interest rate can also promote reasonable housing consumption demand. For bank credit, the impact on bank fundamentals is relatively neutral.
4. What is the impact on the stock market? For the stock market, in theory, if the interest rate falls, the stock price will rise; When the interest rate rises, the stock price falls. Interest rates affect stock prices in two ways:
Path 1: when interest rates rise, people think that deposits will get more premium, so they may turn from the stock market to bank savings or bonds, resulting in a decrease in the supply of funds in the stock market and a decline in stock prices; On the contrary, interest rates have fallen, the supply of funds in the stock market has increased, and the stock price has also risen.
Path 2: Interest rate has certain influence on the operation of listed companies. The increase in the loan interest rate of LPR will increase the interest burden of enterprises, thus reducing profits, and then reducing the dividend distribution of enterprises' stocks, which will also lead to the decline of stock prices; On the contrary, lowering the loan interest rate will reduce the burden on enterprises, thus improving their profitability and then raising the stock price.
Of course, experienced investors here should know that in the medium and long term, the rise and fall of interest rates is not simply negatively related to the rise and fall of stock prices. Because the long-term trend of individual stocks is not only affected by interest rates, but also by economic growth, industry development and market sentiment. Temporary interest rate hikes or interest rate cuts are only a small band that affects the stock market for a long time.
Generally speaking, the application of LPR is more and more extensive, which directly affects the "money bag" of individuals and enterprises. For the stock market, there is a saying that "there is no bear market", and continuous interest rate cuts by the central bank are of positive significance to boosting market confidence.
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