The central bank may raise interest rates twice before it is difficult

The relevant research report stated that as long as the market still has excess liquidity, it is expected that the PBOC will continue to tighten liquidity by raising the deposit reserve ratio and open market operations. At the same time, interest rates will increase twice in the remaining months of this year.

“China will continue to tighten liquidity by raising the reserve ratio of deposits and open market operations to achieve the goal of 16% growth in the broad money supply (M2) for the whole year,” but Citi believes that The deposit reserve ratio has reached a high level and it is expected that more open market operations will be used in the future."

The report also pointed out that as the inflation rate continues to rise, it is expected that the People's Bank of China will further raise interest rates to manage inflation expectations and the total amount of the entire society. "We maintain our estimate of raising interest rates twice (50 basis points) for the rest of this year."

In terms of market influence, changes in future policy instruments will likely have a neutral effect on liquidity unless inflation exceeds expectations.

The report predicts that the money supply will remain at a normal level in the second quarter of this year. And the end of the second round of quantitative easing should also reduce China’s tightening pressure, which is another positive catalyst for the steady market rebound.

The People's Bank of China announced earlier that it raised the reserve requirement ratio by 0.5% from April 21 (Thursday), which is the fourth time this year and the 10th increase since last year, which will allow the rate of large-sized financial institutions to reach 20.5%. Historically high; and since last October, the central bank has raised interest rates four consecutive times.

With the vigorous development of China's paint industry in recent years, internal and external wall coatings can be said to be contributing factors. In 2009, China's coating output reached 7,754,400 tons, and the total output of architectural coatings was 2,261,700 tons, making China a global leader in paint production. According to the author's understanding, China's paint output reached 9.666 million tons in 2010, an increase of 22.8% over the same period last year. Among them, the total output of architectural coatings was 3.519 million tons, a year-on-year increase of 23.7%. It can be seen from this that China's architectural coatings have seen a very strong uptrend, and the demand for interior wall coatings, such as interior wall coatings and exterior wall coatings, has continued to pick up as the economy recovers. Despite the optimism of the market for architectural coatings, the recent increase in interest rates by the central bank and the increase in raw material prices seem to be a stumbling block to the development of architectural decorative coatings.

The Central Bank went uphill to decorate the paint market

It is understood that since February 9th, the one-year benchmark deposit rate of financial institutions has been raised by 0.25 percentage points, and the benchmark interest rates for Other grades have also been adjusted accordingly. This is the first time that the People's Bank of China has raised interest rates this year and is also raising interest rates for the third time since 2010. In the 1 month before and after the Spring Festival, the "New Country Eight", the real estate tax pilot program and the central bank's interest rate hike have come one after another. Once the market thought that high prices were difficult to be shaken and the regulation and control feared "air conditioning." Today, this view seems to have shifted, and many experts have said during the visit that house prices could be lowered in the next few months. Although people in the industry generally believe that the central bank raising interest rates does not come from real estate, it once again constitutes a negative factor for the real estate market. If we say that the introduction of the "New Country Eight" has exceeded market expectations, then the first interest rate increase at the beginning of the Year of the Rabbit will once again challenge the expectations of the supply and demand sides.

Although this time the central bank raised the interest rate by 0.25 percentage points is not large, but it depends on the cumulative effect of the policy, three consecutive increases in interest rates increase the cost of buyers holding real estate, which will reduce the real estate market turnover. According to the author's knowledge, due to the large real estate bubble in recent years, real estate developers will face difficulties after the central bank raises interest rates. Some less powerful real estate developers will face financial constraints and real estate developers will face enormous pressure from banks. In order to ease the pressure on the flow of funds brought about by bank interest rate hikes, there may be problems such as delays in the payment of building materials traders. As a result, the building materials market will inevitably be affected by its delays, resulting in the failure of the building materials market to function properly. As an essential decorative coating in real estate construction, it is bound to be affected. In addition, some homebuyers will be deterred by the increase in the cost of purchases, which will inevitably lead to a decrease in the demand for decorative paint products, which will affect the normal development of the market.

At present, in addition to responding to the national policy of “New Country Eight”, the real estate tax pilot scheme and the central bank’s raising interest rates, the building decorative coating market has also made the construction decorative coating market exhausted from the explosion of coating raw materials in 2009.