I posted on the note from UBS briefly yesterday, following the announcements from China on Tuesday. Adding a little more now.
The analysis highlights a positive shift toward a more accommodative policy stance, though it falls short of the significant stimulus measures seen in past years that drove sustained market rallies. According to the note, monetary easing alone is unlikely to break the ongoing deflation-deleveraging cycle. Instead, it calls for greater fiscal intervention, suggesting that additional stimulus could arrive in October through a budget revision, particularly if third-quarter GDP remains significantly below the 5% target.
In the context of China’s equity markets, the analysis predicts near-term support following the stimulus news, provided there is evidence of effective implementation. Expected rate cuts and capital market measures are likely to benefit state-owned enterprises (SOEs) in high-dividend sectors such as utilities, telecoms, energy, and financials. However, caution remains regarding property developers, though leading property agencies may gain from the easing policies.
In terms of currency strategy, the report advises hedging against exposure to the Chinese renminbi as the US election approaches. The Australian dollar is viewed favorably, with analysts expecting it to benefit from China’s pro-growth policies. Additionally, the property sector’s boost could drive demand for steel-making commodities like iron ore, presenting potential upside for major Australian miners.
