The news out of China from the weekend was of supportive policy moves:
A snippet from UBS, analysts there are optimistic on the developments. On more broader moves from Chinese policy makers:
China’s broader package of response measures is starting to take shape.
- This latest round of measures adds to a growing list of steps from China in recent weeks on the fiscal, monetary, and property front. Following several rate adjustments, we anticipate 1–2 more reserve requirement ratio cuts and 10–20bps in additional medium-term lending facility cuts into year-end. We anticipate more property-focused assistance, such as further easing of home purchase restrictions in select cities (especially top-tier cities), lowering down payments, allowing refinancing, or providing funding support for distressed developers, any of which would help rebuild investor and consumer confidence in the recovery.
- If policy measures continue to be unveiled in the coming weeks, the market narrative may shift from “too little, too late” to a more confident stance as policymakers regain credibility.
And, on the yuan:
- supportive policy now tracking closer to our base case scenario
- More convincing stimulus would be a tailwind for the yuan, but near-term dollar strength is the bigger driver now, with USDCNY set to trade near 7.4 by end-December
Daily offshore yuan against the US dollar
