Total social financing also jumped to RMB2.070b.
According to Bank of America Merill Lynch, China's credit data came in better than expected, with new loans rebounded to RMB1,050bn in March from RMB645bn in February (vs. market expectation at RMB1,000bn), and Total Social Financing (TSF) jumped to RMB2,070bn from RMB939bn in February (vs. market expectation at RMB1,800bn). FX reserves rose by US$129bn in 1Q to US$3,950bn at end-March, after rising US$159bn in 4Q13.
No credit squeeze in February nor monetary easing in March
Investors appeared quite bearish after the release of low February credit data, but as we pointed out then, we should not extrapolate too much of February data which were heavily distorted by the Lunar New Year holiday. March's rebound indicates that there was neither intended nor unintended credit squeeze.
The rebound of bank loans and TSF does not suggest monetary easing either, in our view. In fact, yoy growth of outstanding bank loans and TSF moderated to 13.9% and 17.1% respectively in March from 14.2% and 18.1% in February.
How are trust and bond activities after default concerns?
By checking the breakdown of TSF, the rebound in March from February was mainly driven by new RMB loans, corporate bond, non-discounted bills and entrusted loans.
As expected, new trust loans in March are still weak (RMB95bn in March versus RMB78bn in February, comparing to average RMB153bn per month in 2013), due mainly to more caution on the part of investors post the near-default of one trust loan in January and the government's proactive measures in controlling risks in the trust sector.
Despite the first bond default in early March which created some panic in the financial markets, new corporate bond rebounded to RMB252bn in March from RMB100bn in February.
Still, we see the impact of first bond defaults. Demand for riskless and high investment grade bonds improved and yields on those bonds also declined in the past few months.
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