China: Credit expansion in January marked a major turning point- CitiBank

According to analysts at CitiBank Chinese equities will be able to reclaim the levels reached in early 2018, amid domestic stimulus, still growing earnings and capital inflows. 

Key Quotes: 

“The real game changer for financial markets may be the large credit expansion in China seen in January 2019, aimed at boosting the economy. The CNY4.6 trillion of new aggregate financing in January was spread out among mortgages, corporate bonds, both short- and long-term corporate loans, as well as off-balance sheet financing. The fact that bill financing and off-balance sheet credit are seeing a comeback after a deep freeze in the prior two years should serve as further evidence that authorities desire to ease credit conditions and signals a material change in the conservative targeted easing of 2018 to a more broad based and direct stimulus.”

“This was followed by China announcing at the National People's Congress in March that it will reduce taxes and fees totaling 2 trillion yuan, or around $298 billion this year. That's almost twice as much fiscal stimulus than originally planned.”

“Combining valuation re-rating and earnings growth, Citi analysts expect Chinese equities to be able to reclaim the levels reached in early 2018, which is still around 15-20% above end of March 2019 levels for the MSCI China and CSI 300 indices.”