Still more as the market tries to make sense of the 500 bn yuan liquidity add news

More from MNI (a good source for China news):

  • Move … is an indication that the authorities are mindful of short-term liquidity pressures caused by share sales, public holidays and the end-of-quarter
  • The use of the bank’s Standing Lending Facility (SLF) isn’t a sign that Beijing is responding to dismal August data by easing policy further, traders said
  • Even if the bank decides to roll the funds over in three months, they don’t have the permanence of a reserve requirement cut, they said
  • Crucially, the SLF was also likely transacted at around 4% versus funds available via reserve cuts, which can be had for under 2%, said Bank of Dongguan analyst Chen Long. “This helps with liquidity conditions but it doesn’t help interest rates,” he said
  • The market rally failed to note a commentary from the official Xinhua News Agency late Tuesday which accused those calling for fresh stimulus to support the economy of “failing to clearly see the Chinese economy’s new normal.”
  • Bank of America-Merrill Lynch economist Ting Lu said this SLF report indicates that Li Keqiang’s government will do all it can to support the economy, without actually being seen to deviate from the official line, because growth risks falling through 7%. “We think Premier Li will be forced to significantly step up its stimulus measures in coming weeks to arrest the slowdown,” he told clients in a note.

Earlier posts here: