Recovery hopes rising in China – Danske Bank
A package of growth-supporting initiatives and statement form the Chinese leadership has been well received by equity markets as it raises hope of a growth rebound, Danske Bank’s analysts note.
Chinese housing and private consumption growth to improve
“In China the big news has been the announcement of large-scale stimulus across a wide range of areas. Lower interest rates, a reduction in the reserve requirement ratio for banks, lower mortgage rates on existing loans and measures to lift the equity market were among the policy initiatives.”
“China’s leadership in the Politburo also sent a strong signal that the decline in the housing market should come to a halt now and sent a clear pro-growth signal after some years of more moderate signals and stimulus. The news has sent offshore Chinese equities sharply higher with an increase of 25% in seven days, the biggest 7-day increase since 2008, as investors have scrambled to close underweight positions in Chinese equities.”
“The jury is still out if the stimulus will be big enough to turn the crisis but with the strong policy signal, we expect more stimulus to be rolled out if needed. We now expect to see a gradual improvement in Chinese housing and private consumption growth over the next year and that the two sectors will slowly put the economy on a more solid footing.”
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FXStreet Insights Team
FXStreet
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