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20 Apr 2015
PBoC steps up easing with 100bps cut in RRR - TradeTheNews
FXStreet (Barcelona) - The TradeTheNews Team shares the recent key developments in the Chinese market, and further comment that investors grappled with conflicting developments over the weekend.
Key Quotes
“Late on Friday, markets around the world sold off after reports cited CSRC spokesperson "encouraging short selling" by institutional investors so as to crack down high leveraged "umbrella trust" margin trading. Subsequently, CSRC clarified the statement was not intended to punish equities or depress the market, but rather promote a "healthy" market function.”
“On top, the PBoC announced a 100bp RRR cut from 19.5% to 18.5% effective Monday - the biggest RRR move since 2008 estimated to release as much as CNY1-2T of liquidity.”
“Regional economists disagreed on which was more appropriate given the weak recent set of economic data, the timing or the scope. PBoC chief researcher however explained the move as an intention to keep liquidity stable, reaffirming "neutral stance" on monetary policy despite interpretations that China has entered a more aggressive monetary easing cycle.”
“Also of note on the monetary front, PBoC is reportedly also considering allowing banks to swap local-govt bailout bonds for cash to boost liquidity, viewed to be in the same vein as ECB's LTRO operations.”
“While the markets digested interpretations of a bearish CSRC comment combined with another easing by the PBoC, China housing data continues to showcase the struggling property sector. March home prices fell 0.2% for the 11th month of decline m/m, and y/y fell by the biggest margin on record of -6.1%. Prices overall declined in 48 out of 70 cities, which was lower than 61 in the prior month.”
“Perception of a topping out in the property space has been widely attributed to the recent surge in margin trading account that produced a 30%+ YTD rally on the mainland.”
Key Quotes
“Late on Friday, markets around the world sold off after reports cited CSRC spokesperson "encouraging short selling" by institutional investors so as to crack down high leveraged "umbrella trust" margin trading. Subsequently, CSRC clarified the statement was not intended to punish equities or depress the market, but rather promote a "healthy" market function.”
“On top, the PBoC announced a 100bp RRR cut from 19.5% to 18.5% effective Monday - the biggest RRR move since 2008 estimated to release as much as CNY1-2T of liquidity.”
“Regional economists disagreed on which was more appropriate given the weak recent set of economic data, the timing or the scope. PBoC chief researcher however explained the move as an intention to keep liquidity stable, reaffirming "neutral stance" on monetary policy despite interpretations that China has entered a more aggressive monetary easing cycle.”
“Also of note on the monetary front, PBoC is reportedly also considering allowing banks to swap local-govt bailout bonds for cash to boost liquidity, viewed to be in the same vein as ECB's LTRO operations.”
“While the markets digested interpretations of a bearish CSRC comment combined with another easing by the PBoC, China housing data continues to showcase the struggling property sector. March home prices fell 0.2% for the 11th month of decline m/m, and y/y fell by the biggest margin on record of -6.1%. Prices overall declined in 48 out of 70 cities, which was lower than 61 in the prior month.”
“Perception of a topping out in the property space has been widely attributed to the recent surge in margin trading account that produced a 30%+ YTD rally on the mainland.”