Advertisement

Investors eye up a new round of Chinese stimulus

Chinese policymakers have announced new stimulus measures to contain the fallout from the coronavirus. Asset managers are already positioning themselves.

The People’s Bank of China (PBOC) pumped ¥1.2trn (£130bn) of extra liquidity into money markets on Monday. Banks have been told not to call in loans made to companies in Hubei, the province at the centre of the outbreak. Annualised first-quarter growth could sink as low as 4.5%; in 2019 GDP rose by 6.1%. 

Advertisement - Article continues below

The new stimulus is limited for now. It is aimed at keeping the financial system running and offering targeted help to affected sectors and regions, say Chang Shu and David Qu of Bloomberg Economics. But once the virus is contained authorities are likely to shift towards a more general push to revive growth.

What would a new stimulus look like? Analysts are banking on “looser monetary policies to stimulate demand, more subsidies to bolster struggling firms, and a weaker renminbi to goose exports”, write Keith Johnson and James Palmer for Foreign Policy. The latter measure would enrage Donald Trump, who has accused Beijing of currency manipulation. Add in the fact that disruption due to the coronavirus will encourage US firms to redesign their Asian supply chains and the outbreak will “only accelerate” the ongoing “decoupling” of the US and Chinese economies.

Asset managers are already positioning themselves for a new round of stimulus, says Michael Mackenzie in the Financial Times. As well as boosting emerging market equities, any Chinese easing could “move the needle for the global economy”. But “wait and see what kind of stimulus arrives from China” before piling in. It remains to be seen whether all this talk of “buying the dip” is just short-term trading chatter, or whether it marks the start of a brighter period for cyclical stocks. 

Advertisement
Advertisement

Recommended

Guru watch: buy gold ahead of China's big currency move
Gold

Guru watch: buy gold ahead of China's big currency move

China has steadily been building “a renminbi-based international payments system", says Charles Gave, founding partner and chairman of Gavekal.
27 Jul 2020
China’s stockmarket melt-up will end in tears
China stockmarkets

China’s stockmarket melt-up will end in tears

China's stockmarkets are up by 13% so far this year, but the rally could end in a brutal crash.
10 Jul 2020
The tug of war over Hong Kong
China's economy

The tug of war over Hong Kong

China’s move to take more control over Hong Kong could lead to deeper civil unrest and imperil its role as a global financial centre.
13 Jun 2020
Chinese stocks are set for a bumpy ride
China stockmarkets

Chinese stocks are set for a bumpy ride

Chinese stocks have held up well during the pandemic, but the recovery has been uneven.
12 Jun 2020

Most Popular

Can the recent rally in sterling continue?
Sponsored

Can the recent rally in sterling continue?

A "double top"  – a very recognisable pattern – is forming in in the US dollar. Dominic Frisby explains what it is, and what it could tell us about st…
3 Aug 2020
UK banks have had a shocking week – so it’s probably a good time to buy
UK stockmarkets

UK banks have had a shocking week – so it’s probably a good time to buy

Lloyds Bank reported a £676m loss this week. And, with all of the UK's high street banks having a terrible time of things, bank stocks are detested ri…
31 Jul 2020
Gold bugs' dreams are coming true – but we could still see a V-shaped recovery
Gold

Gold bugs' dreams are coming true – but we could still see a V-shaped recovery

John and Merryn talk about how it's perfectly reasonable to expect a V-shaped recovery and to continue holding gold as well. Plus, inflation, staycati…
30 Jul 2020