”We expect the rally in Chinese equities to extend as equity investors believe China has reached a major policy shift. The support measures announced are welcome first steps but will do little to address the underlying demand problem. Stabilisation of the property market, more accommodative fiscal policies, and sustained income support for households are essential for improving the economy long-term. Last week, the People’s Bank of China unleashed a broad package of monetary stimulus to address the country’s slowing economic growth. This included 20% – 30% cuts in key policy rates, an increase in liquidity in the banking system, and a downward adjustment of existing mortgage rates aiming to reduce the interest burden on households. In addition, measures were announced that seek to boost consumption, pledging to increase fiscal spending. We highlight the key implications of this stimulus package for the Chinese economy and various asset classes.“
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Morten W. Langer
