China's biggest liquidity injection in three years not a game changer for BCA while HSBC fund sees muted impact

Stock investors, by a record 12 per cent, stocks to underweight in March, Chinese economy

China is set to inject the biggest amount of liquidity into the system in more than three years from a cut in banks’ reserve ratio. Stock investors may need to tread with caution as past market reactions have been mixed at best while the economy struggles.

The People’s Bank of China this week announced a 50-basis point cut reserve requirement ratio effective from December 15, the second this year after a July 9 move. The decision will free up 1.2 trillion yuan (US$188 billion), the most since a full percentage point reduction in October 2018 unleashed the same amount of cash.

The Hang Seng Index rose by 2.7 per cent from near a 15-month low, while the benchmark in Shanghai gained 0.2 per cent. Alibaba Group Holding, the owner of this newspaper, surged by a record 12 per cent after losing almost half of its market value over the past six months.

Not every RRR cut has generated the same level of optimism. China has now lowered the reserve ratio 11 times since April 2018, adding a cumulative 8.2 trillion yuan of liquidity, according to central bank data. The Hang Seng Index rose on seven of those occasions. HSBC Jintrust expects a muted impact from this month’s cut.

Stock investors, by a record 12 per cent, stocks to underweight in March, Chinese economy

Premier Li Keqiang says China has many tools to stabilise economic growth. Photo: Reuters

“The RRR cut is within market expectations and the PBOC has refrained from expanding the base currency in recent years,” Shen Chao, a strategist at HSBC Jintrust Fund Management in Shanghai. “It does not represent a shift in monetary policy. We expect the impact to be neutral.”

The central bank’s mini-stimulus came as China’s growth momentum waned over the past two quarters, hobbled by Covid-19 lockdowns, an energy crisis and a drop in home prices. Chinese authorities have also lately attempted to calm markets roiled by concerns over regulatory crackdowns and Chinese companies being booted off US exchanges.

Those concerns will persist for now, according to BCA Research, and the latest RRR cut will not alter its view on the outlook for the market. Strategists at the Montreal-based firm downgraded Chinese stocks to underweight in March on a one-year outlook, citing the risk of policy over-tightening.

The RRR cut “is unlikely to be a game changer for the Chinese economy,” the firm said in a report on Tuesday. “The more important drivers of China’s business cycle and financial markets are credit growth and investment. Both these variables impact economic conditions with a lag and have yet to rebound decisively.

For Invesco, the RRR cut is exactly what the Chinese economy needs to get it back on track, it said in a report on Tuesday. It is feasible that more RRR cuts are in store over the next year in order to stabilize growth, it added.

“Heightened market fears of a more serious slowdown could have pushed policymakers to enact the ‘Beijing put’ against further economic downturn and bolster market sentiment,” said David Chao, global market strategist for Asia-Pacific ex-Japan. “With this cut, policymakers are demonstrating a more forceful approach to prevent an all-out property market rout.”

Stock investors, by a record 12 per cent, stocks to underweight in March, Chinese economy

The People’s Bank of China has trimmed banks’ reserve-requirement ratio 11 times since April 2018, injection a cumulative 8.2 trillion yuan in the process. Photo: Bloomberg

JPMorgan Asset Management expects the RRR cut to boost investment sentiment and support valuation in the stock market, its Shanghai-based global markets strategist Zhu Chaoping said.

“We expect to see A-shares’ outperformance in 2022 on the back of the current attractive valuation,” he said in a report. “However, investors should also bear in mind that the long-term reform goals, such as common prosperity, deleveraging and decarbonisation, remain on the table and may continue to weigh on the investment landscape.”

For analysts at Morgan Stanley, the PBOC’s decision is more a signal to support sentiment than a catalyst to notable credit growth rebound. Its recent “channel checks” show that banks have no aim to change their full-year credit plans at the end of 2021.

“Entering 1Q22, we think the partial removal of some demand-side bottlenecks together with more active fiscal policy could prevent credit growth from sliding further,” they wrote in a December 6 report.

Investors, however, could also be mistaken for chasing up some Chinese property stocks like Sunac China and Longfor Group following the RRR cut. The RRR cut was announced only after China Evergrande disclosed another failure to meet an offshore debt obligation, which suggests policymakers are not willing to bail out indebted developers, BCA Research said.

“Policy easing is unlikely to bolster China’s real estate sector,” it said. “A structural shift has occurred whereby property developers’ old business model – borrowing as much as they could and accumulating real estate assets – will not be profitable if home prices stop rising rapidly.”

News Related

OTHER NEWS

Strongest growth French economy in more than 50 years

Photo: ANP France’s economy has shown the strongest growth in more than 50 years in 2021, thanks to the strong recovery from the corona crisis. According to figures from the ... Read more »

Amsterdam calls a halt to fast delivery firms' dark store expansion

Photo: DutchNews.nl Amsterdam has decided to ban fast grocery delivery firms from setting up any more distribution points in residential areas after a surge in complaints from locals about noise ... Read more »

Gazprom supplies record-breaking 16 bcm of gas to Turkey via Blue Stream in 2021

The growth in supplies coincided with a historical record of gas consumption in Turkey, Gazprom Export also pointed out Read more »

Pizza Hut launches its spiciest pizza creation as it hops into the spicy food trend

Photo by: Pizza Hut Press Release Pizza Hut is the latest fast-food chain to get into the spicy food trend, and for starters, it has rolled out the spiciest pizza ... Read more »

Cerebra Int Standalone December 2021 Net Sales at Rs 70.09 crore, up 277.09% Y-o-Y

Reported Standalone quarterly numbers for Cerebra Integrated Technologies are: Net Sales at Rs 70.09 crore in December 2021 up 277.09% from Rs. 18.59 crore in December 2020. Quarterly Net Profit ... Read more »

Orient Bell Standalone December 2021 Net Sales at Rs 183.95 crore, up 24.39% Y-o-Y

Reported Standalone quarterly numbers for Orient Bell are: Net Sales at Rs 183.95 crore in December 2021 up 24.39% from Rs. 147.88 crore in December 2020. Quarterly Net Profit at ... Read more »

‘American investors are playing Monopoly with our housing market'

Podcast Money CloseAccording to a new report, the absurd rise in prices of homes and rental properties in the private sector is caused by large institutional investors, mostly from America, ... Read more »

Regulator targets 'crippling' insurance bills for residents of flats after Grenfell tragedy

Michael Gove says some providers are refusing insurance cover for people living in buildings deemed unsafe as work on replacing cladding continues to drag on. Read more »

Activists occupy Sterrebos near Nedcar, ignore emergency order

In the municipalities of Sittard-Geleen and Echt-Susteren, where the car factory is located, emergency orders are still in effect until 09:00. With this, the police managed to prevent actions and ... Read more »

Finance Ministry keeps 2022 GDP outlook despite Omicron

Tourists visit Maya bay in Krabi province on Jan 3, 2022. The Finance Ministry forecast the country to receive 7 million foreign visitors this year. (Reuters photo) The Finance Ministry ... Read more »

NLRB files complaint against Amazon for ‘threatening, surveilling and interrogating' workers

An employee scans packages at Amazon’s distribution center in Staten Island, New York, United States (Image: Reuters/Brendan McDermid) The United States National Labor Relations Board (NLRB) has accused Amazon of ... Read more »

Edtech infra firm Teachmint acquires ERP startup MyClassCampus

Education infra and teaching platform Teachmint has acquired MyClassCampus, an educational ERP player, which enables campuses with end-to-end digitization of their operations, management and communication, it said on January 28. ... Read more »

Captain Gopinath: Air India is dead, long live Air India

Air India has returned to the house of Tatas. She was snatched by the government through nationalisation in 1953, when Jawaharlal Nehru was Prime Minister. Then, she had allure, glamour, ... Read more »

National Insurance rise in April 'is going ahead' says Technology Minister

Chris Philp tells Sky News the funds are needed for the NHS and social care and the move is a "proportionate way" of finding the cash. He added the government is in "listening mode" about the rising cost of living. Read more »

Nissan recalls 793,000 Rogue SUV units in the U.S. and Canada

Photo by: Dayron Villaverde/Pixabay Nissan issued a recall for the older models of its Rogue SUVs. It was said that around 793,000 units in the United States and Canada are ... Read more »

Research: Smartphone sales up in 2021 despite chip shortage

Photo: ANP The global market for smartphones grew last year despite chip shortages, which meant that companies such as Apple and Samsung were able to produce fewer mobiles. According to ... Read more »

Shree Digvijay Consolidated December 2021 Net Sales at Rs 151.57 crore, up 5.66% Y-o-Y

Reported Consolidated quarterly numbers for Shree Digvijay Cement Company are: Net Sales at Rs 151.57 crore in December 2021 up 5.66% from Rs. 143.46 crore in December 2020. Quarterly Net ... Read more »

Shree Digvijay Standalone December 2021 Net Sales at Rs 151.57 crore, up 5.66% Y-o-Y

Reported Standalone quarterly numbers for Shree Digvijay Cement Company are: Net Sales at Rs 151.57 crore in December 2021 up 5.66% from Rs. 143.46 crore in December 2020. Quarterly Net ... Read more »

Avantel Standalone December 2021 Net Sales at Rs 29.09 crore, up 16.43% Y-o-Y

Reported Standalone quarterly numbers for Avantel are: Net Sales at Rs 29.09 crore in December 2021 up 16.43% from Rs. 24.99 crore in December 2020. Quarterly Net Profit at Rs. ... Read more »

CSL Fin Standalone December 2021 Net Sales at Rs 18.93 crore, up 27.39% Y-o-Y

Reported Standalone quarterly numbers for CSL Finance are: Net Sales at Rs 18.93 crore in December 2021 up 27.39% from Rs. 14.86 crore in December 2020. Quarterly Net Profit at ... Read more »

Odyssey Tech Standalone December 2021 Net Sales at Rs 5.53 crore, up 23.87% Y-o-Y

Reported Standalone quarterly numbers for Odyssey Technologies are: Net Sales at Rs 5.53 crore in December 2021 up 23.87% from Rs. 4.47 crore in December 2020. Quarterly Net Profit at ... Read more »

Dalmia Bharat Consolidated December 2021 Net Sales at Rs 2,731.00 crore, down 4.41% Y-o-Y

Reported Consolidated quarterly numbers for Dalmia Bharat are: Net Sales at Rs 2,731.00 crore in December 2021 down 4.41% from Rs. 2,857.00 crore in December 2020. Quarterly Net Profit at ... Read more »

MapmyIndia share prices falls over 11% after poor December quarter numbers

The share price of CE Info Systems Ltd, which operates under the brand name MapmyIndia, dropped 11.36 percent to hit a low of Rs 1,271.65 on the BSE after the ... Read more »

WABCO India Standalone December 2021 Net Sales at Rs 652.92 crore, up 15.26% Y-o-Y

Reported Standalone quarterly numbers for WABCO India are: Net Sales at Rs 652.92 crore in December 2021 up 15.26% from Rs. 566.50 crore in December 2020. Quarterly Net Profit at ... Read more »

Tatas deploy top guns to steer A-I panel: Network Exclusive

Representative image Tata Sons Senior Vice President Nipun Aggarwal has been appointed with the task of steering the Air India management committee, CNBC-TV18 has learnt. CNBC-TV18 has exclusively learnt the management committee will ... Read more »

General Motors reveals plans to hire 8,000 tech workers for EV development

Photo by: jm3/Flickr (CC BY-SA 2.0) General Motors revealed on Wednesday, Jan. 26, that it has plans of hiring more than 8,000 tech workers this year. The move is part ... Read more »

Bad Bank received all necessary approvals to commence operations: SBI Chairman Dinesh Khara

State Bank of India Chairman Dinesh Kumar Khara Dinesh Khara, the chairman of country’s largest lender State Bank of India (SBI), said on January 28 the proposed Bad Bank had ... Read more »

Attention for Signify and suppliers Apple at trade shows

Photo: ANP At the Amsterdam stock exchange, attention will be focused on Signify on Friday. The lighting group suffered less from shortages of parts last quarter and saw profits rise. ... Read more »

Dr Reddy's Q3 result: Profit declines 29% sequentially to Rs 707 crore, revenue down to Rs 5,320 crore

Representative image Dr. Reddy’s Laboratories, on January 28, reported a consolidated profit after tax (PAT) of Rs 707 crore for the third quarter-ended December 2021, up 15 percent from the adjusted ... Read more »

Ranji Trophy to be held in two phases: BCCI

BCCI Secretary Jay Shah on Friday said that the postponed Ranji Trophy will be held in two phases starting next month, clearing the decks for India’s premier domestic competition to ... Read more »

Ushakiran Fin Standalone December 2021 Net Sales at Rs 0.04 crore, down 73.85% Y-o-Y

Reported Standalone quarterly numbers for Ushakiran Finance are: Net Sales at Rs 0.04 crore in December 2021 down 73.85% from Rs. 0.17 crore in December 2020. Quarterly Net Profit at ... Read more »

India needs to follow the China model in regulating tech industries: Vivek Wadhwa

Facebook and Twitter have personalisation features that create filter bubbles, which deepens divisions among people. (Photo by Thought Catalog from Pexels) India must follow China’s example to rein in technology ... Read more »

West Bengal reduces RT-PCR test rate to Rs 500

The West Bengal government has slashed the rate of an RT-PCR test by nearly half to Rs 500 from Rs 950, a senior health official said on Friday. However, the ... Read more »

“We are not PMC Bank. We are Unity, we are a different institution,” Jaspal Bindra says in exclusive interview 

Centrum Group Chairman Jaspal Bindra Starting on 25 January, PMC Bank branches started operating as Unity SFB branches. This followed the Government of India sanctioning and notifiying a scheme for ... Read more »

Shanti Educatio Standalone December 2021 Net Sales at Rs 1.01 crore, up 464.5% Y-o-Y

Reported Standalone quarterly numbers for Shanti Educational Initiatives Limited are: Net Sales at Rs 1.01 crore in December 2021 up 464.5% from Rs. 0.18 crore in December 2020. Quarterly Net ... Read more »

Steelcast Standalone December 2021 Net Sales at Rs 79.00 crore, up 80.57% Y-o-Y

Reported Standalone quarterly numbers for Steelcast are: Net Sales at Rs 79.00 crore in December 2021 up 80.57% from Rs. 43.75 crore in December 2020. Quarterly Net Profit at Rs. ... Read more »

L&T bags 'large' offshore contract from ONGC

Larsen & Toubro (L&T) on Friday said that its wholly-owned arm has bagged a large offshore contract from ONGC for the seventh development phase of their pipeline replacement projects. This ... Read more »

HCL Tech sets up engineering and R&D centre in Canada

HCL Tech | Representative image HCL Technologies on Friday said it has opened an Innovation Centre focused on Engineering and R&D services in Edmonton, Alberta. Bringing together an ecosystem of ... Read more »

India's gold demand skyrockets to 797.3 tons in 2021: WGC

Representative image India’s gold consumption surged to 797.3 tonnes in 2021, on the back of recovery in consumer sentiments and pent-up demand post COVID-19-related disruptions and the bullish trend is ... Read more »

Dalmia Bharat Standalone December 2021 Net Sales at Rs 33.00 crore, down 13.16% Y-o-Y

Reported Standalone quarterly numbers for Dalmia Bharat are: Net Sales at Rs 33.00 crore in December 2021 down 13.16% from Rs. 38.00 crore in December 2020. Quarterly Net Profit at ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic