China reserve requirement ratio to be slashed anytime soon: Maybank
Here are three reasons why an RRR cut is inevitable in China.
Here's more from Maybank Kim Eng:
Quite a lot of media talks about a potential reserve requirement ratio (RRR) cut in the near future. The media reports quoted 3 signals behind the potential RRR cut.
1) The state-back China Securities Journal pointed out that the funding conditions is quite tight, while the economy growth is slowing down, another RRR cut looks appropriate.
2) The former PBOC chief Liu Mingkang pointed out that there would still be room for RRR and interest rate cut.
3) PBOC carried out reverse repo amounting Rmb143b yesterday, and in the past the large scale reverse report was usually the prelude of RRR cut.
Overall we believe that RRR cut may come any time soon, especially as the upcoming (Jun12) CPI is likely to fall below 2.5%, which pave a lot of room for PBOC to carry out monetary easing. For stock picks, the RRR cut should benefit smaller banks (CITIC, MSB, CRCB) better, at least in short term, though the actual impact on earnings are likely to be minimal. There are still some room for RRR and interest rate to go down, but we believe that PBOC is likely to end the monetary easing in late 3Q12.
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