Morgan Stanley: Market misreading Mr Zhou's reserve rate will not rise soon

The latest report from Morgan Stanley said that many investors, based on the remarks made by central bank governor Zhou Xiaochuan the night before, concluded that the deposit reserve rate was about to rise, "this understanding is wrong". A day earlier, Zhou Xiaochuan explained two topics in the 2009 Financial Forum: Why China needs the regulatory tool for deposit reserve rates, and why it is necessary to maintain the bank's deposit and lending spreads (see the Morning Post 23rd A37 Edition). Then, some market participants began to worry that the statement may mean that the central bank will take a rise in deposit reserve rate and other monetary tightening measures.　　A-share market fell 2.3% on the day.　　But Morgan Stanley's report said the environment in which Mr. Zhou made the remarks was an academic discussion of monetary policy, he mentioned that the deposit reserve rate adjustment and the maintenance of deposit and loan spreads are defending the central bank's practical manipulation (note: At the same day, Zhou Xiaochuan mentioned that the Deposit Reserve Fund as a monetary policy tool should be scrapped).　　Morgan Stanley pointed out that there was no reason for Mr Zhou's remarks to be seen as a signal that central banks would raise reserve rates. Morgan Stanley reiterated that the central bank was unlikely to raise deposit reserve rates and raise interest rates by the middle of 2010, but if the large external balance of payments surplus prematurely caused an activity overrun, it does not preclude the rise in deposit reserve rates from the beginning of the second quarter of 2010. As for the second half of the year, the central bank raised interest rates by up to two times, with no more than 27 basis points (i.e. 0.27%).