M UpdateChina Financials | Asia PacificStrong Jan credit due to late CNY and strong competitionMorgan Stanley Asia Limited+Richard Xu, CFAEquity Analyst Richard.Xu@morganstanley.com +852 2848-6729 Beryl YangResearch Associate Beryl.Yang@morganstanley.com +852 3963-2224 Chiyao HuangEquity Analyst Chiyao.Huang@morganstanley.com +852 3963-4624 China FinancialsAsia PacificIndustry ViewAttractiveRelated reports: China Financials: Higher government bond issuance offsets slower loan growth in Dec (14 Jan 2024) China Financials: Stable TSF with Government Bond Swapping LGFV Debt and Loans (13 Dec 2023) China Financials: What to buy if there is no credit impulse in 1Q24? (23 Nov 2023) Strong credit numbers in Jan supported by RMB loans and some pickup in corporate bond issuance, while we see less support from government bonds. M1 growth jumped to 5.9%, while M2 growth declined to 8.7% due to late CNY. Slowdown in TSF growth likely. Jan 2024 TSF beat our expectation, with headline growth remaining flat MoM at 9.5%: New TSF added Rmb6.5tn in Jan 2024, up Rmb504bn YoY or up Rmb4,560bn QoQ. This is supported by: 1) strong new RMB loans at Rmb4.84tn likely driven by more renewal needs in Jan after front-loading last year and strong competition for quality loan demand amid LGFV tightening which led to more front loading by banks to secure borrowers; 2) continued recovery in retail credit growth, and 3) net issuance of corporate bonds at Rmb484bn, up from a low Dec. This marked the highest level since Jan 2022, which may result from bond refinancing and interest payments. On the other hand, government bond issuance slowed down, with net issuance at Rmb295bn in Jan, down both YoY and MoM after a wave of intense issuance in late 2023. Strong recovery in household loans from a low base; mid- to long-term corporate loans added Rmb3.31tn: Both short-term and long-term household loans more than doubled YoY, as early repayment of mortgage loans faded and consumption demand also recovered from a low base after re-opening. Despite 5% YoY decline in new mid- to long-term corporate loans, it remained sizable and at a historically high level. This could result from more renewal demand from loans extended in 1Q23, where we saw aggressive front-loading. In addition, discounted bills declined Rmb973bn, vs a decline of Rmb413bn in Jan-23, suggesting less usage of discounted bills to support loan growth.M1 growth picked to 5.9%, while M2 and household deposit growth slowed due to late Chinese New Year: As corporates tend to have seasonally high salary/bonus/payable settlements before Chinese New Year, they tend to keep more funds in demand deposits, which supported yoy M1 growth due to a late CNY in 2024. Household deposits growth fell to 10.3% and M2 growth slowed to 8.7% also partly due to late CNY as households still tend to withdraw cash before CNY, but...
