Goldman: Broad Credit Growth Disappointed In October

Goldman Sachs note that “October's credit and money data were mixed, but the composition of credit and loans data showed soft credit demand.”

• “October new TSF data came in weaker than market expectations despite the strong government bond issuance in the month.”
• “New RMB loans beat market expectations but the composition of new RMB loan data showed bill financing expanded strongly while medium to long term loan growth decelerated. New RMB loans to the real economy was also weaker than the headline new RMB loans. These matters all implied soft credit demand in the month.”
• “M2 growth was in line with market expectations. The increase in fiscal deposits was stronger than the usual seasonal pattern, implying the large volume of government bond issuance was yet to be fully spent.”
• “Government bond issuance will likely remain at a fast pace in the rest of the year, after the approval of an additional RMB 1 trillion central government bond issuance, which will add to the broad credit growth this year.”
• “Separately, media articles reported that, in the second half of October, several small to medium-sized banks cut deposit rates.”
• “In light of the still weak credit demand, we continue to expect another 10bps policy interest rate cut and 25bp RRR cut before the end of this year.”