Credit Society Review for October: Improved demand from residents, banks' risk evaluation expected to improve

Zheshang released a research report stating that in October 2024, M1 stabilized and rebounded, M2 continued to rise, residential demand recovered, and fiscal stimulus is expected. Specifically, credit growth slowed, with a smaller increase in small monthly credit; on the residential side, the housing market significantly warmed up, and residential demand significantly increased; on the corporate side, interest rates were at historical lows, and corporate demand awaited recovery. Social financing growth was slower compared to the same period last year, but fiscal stimulus is expected to strengthen again, with M1 growth stabilizing and M2 growth continuing to rise. With the continuous progress of stability, growth, and risk mitigation policies, the risk assessment of bank stocks is expected to improve. Zheshang's main points are as follows: In October 2024, social financing increased by 1.4 trillion yuan, a decrease of 448.3 billion compared to the same period last year, with a year-on-year growth rate of 7.8%. The new RMB credit increased by 500 billion yuan, a decrease of 238.4 billion compared to the same period last year, with a year-on-year growth rate of 8.0%. In October 2024, M1's year-on-year growth rate was -6.1%, shrinking by 1.3% compared to the previous month, while M2's year-on-year growth rate was 7.5%, an increase of 0.7% compared to the previous month. According to the Financial Times, the average weighted interest rate for new corporate loans in October was around 3.5%, and the average interest rate for new personal housing loans was around 3.15%, both at historical lows. Credit growth is slowing, and residential demand is improving. In October 2024, new RMB credit increased by 500 billion yuan, a decrease of 238.4 billion compared to the same period last year. Among them, residential loans increased by 160 billion, a net increase of 194.6 billion year-on-year. Corporate physical loans (excluding bills) decreased by 200 billion, a net decrease of 225.8 billion year-on-year, while bill discounts increased by 169.4 billion, a decrease of 148.2 billion year-on-year. (1) On the residential side, the housing market significantly warmed up, and residential demand significantly increased. In October 2024, short-term residential loans increased by 49 billion, a net decrease of 105.3 billion compared to the same period last year, indicating a significant improvement in residential consumption demand; medium and long-term residential loans increased by 110 billion, a net increase of 39.3 billion compared to the same period last year, significantly better than the 62.2 billion decrease in the first nine months, mainly due to the warming housing market and adjustments in existing mortgage rates. According to Ke Rui's monitoring data, the overall sales of new homes in 30 key cities in October reached 14.05 million square meters, an increase of 44% compared to the previous month, stable compared to last year, and a decrease of 34% from September. According to the data on property transactions in the top 30 mid-sized cities in China, the area traded in the first 10 days of November was about 3.25 million square meters, an increase of 131% compared to the first 10 days of October, and an increase of 11% compared to the same period last year. The effects of real estate stimulus policies are beginning to show, but the long-term effects still need to be observed. (2) On the corporate side, interest rates are at historical lows, and corporate demand awaits recovery. In October 2024, short-term corporate loans decreased by 190 billion, a net decrease of 13 billion year-on-year; long-term corporate loans increased by 170 billion, a net decrease of 212.8 billion year-on-year. The interbank repo rate at the end of October was between 0.01% and 0.50%, indicating poor overall lending to the real economy. The average weighted interest rate for new corporate loans in October was around 3.5%, at historical lows, but the stimulative effect of interest rates on real demand is limited. If debt-to-equity funds are in place in the future, financing platform loans may be repaid, leading to a shrinking credit scale in the short term. Considering the credit base at the end of last year, it is expected that there will still be pressure on credit growth in November compared to the same period last year, and credit growth may remain at a low to moderate level. Social financing growth has slowed, and fiscal stimulus is expected to strengthen again. In October 2024, social financing increased by 1.4 trillion yuan, a decrease of 448.3 billion compared to the same period last year. Government bonds contributed the most, but local government bonds decreased compared to the high base last year. Government bonds increased by 1 trillion yuan in October, a decrease of 514.2 billion compared to the same period last year. Net financing for national bonds in October was 348.5 billion yuan, basically the same year-on-year; net financing for general and special local government bonds was 153.8 billion and 422.7 billion respectively, a decrease of 583.3 billion and 42.8 billion compared to the same period last year. Considering the recent approval of 6 trillion yuan in new local government bonds by the Standing Committee of the National People's Congress, it is estimated that there will be approximately 2.8 trillion yuan of outstanding government bonds to be issued this year, an increase of about 700 billion compared to the last two months of last year, strengthening the fiscal support for social financing. M1 growth stabilizes and rebounds, M2 growth continues to rise. In October 2024, M1 decreased by 6.1% year-on-year, narrowing the decline by 1.3% compared to the previous month, indicating a significant improvement in fund utilization. The manufacturing Purchasing Managers' Index (PMI) in October was 50.1%, an increase of 0.3 percentage points month-on-month, crossing the threshold for expansion. M2 year-on-year growth rate was 7.5%, an increase of 0.7 percentage points compared to the previous month, mainly due to the growth of non-banking deposits. RMB deposits increased by 600 billion in October, with non-banking deposits increasing by 1.08 trillion, a net increase of 573.2 billion year-on-year. Investment advice: With the continuous advancement of policies to stabilize growth and mitigate risks, the risk assessment of bank stocks is expected to improve. Focus on the small and medium-sized banks with marketization. Follow these three stock selection clues: 1. Undervalued targets benefiting from the resolution of risks in real estate and urban investment, such as Ping An Bank (000001.SZ) and Industrial Bank (601166.SH), it is recommended to pay attention to Chongqing Rural Commercial Bank (601077.SH) and Bank Of Chongqing (01963). 2. With the decline in risk-free interest rates, the dividend style is expected to move towards absolute returns, recommending Bank Of Jiangsu (600919.SH) and Bank of Shanghai (601229.SH), it is recommended to pay attention to Hong Kong-listed state-owned banks and CITIC BANK (00998). 3. With a slight recovery in risk appetite, recommend undervalued leading banks, especially recommend Jiangsu Changshu Rural Commercial Bank (601128.SH). Risk warning: Macroeconomic slowdown, significant increase in non-performing loans, unforeseen policy actions.