Investors in China’s Stock Market Focus on PBoC Stimulus Measures

Investors in China’s Stock Market Focus on PBoC Stimulus Measures

$CNY

China’s stock market investors are not quite ready to see Beijing scale back its efforts to support the economy.

Stocks started the week lower after improving data prompted traders to pare back their bets for additional stimulus.

The Shanghai Composite Index rallied Tuesday after the PBoC injected cash into the financial system, alleviating concerns over a liquidity crunch.

Then came speculation officials had prepared a sweeping package to boost consumption, triggering a rally in carmakers and firms that sell household goods.

Despite some early signs of success from the government’s tax-cut program, China’s economic stabilization has underwhelmed equity investors, who remain hooked on the prospect of further supportive measures.

In this Q-1 reporting season, which in China really shifts into gear in the coming weeks, may provide further clues on whether companies are starting to see a recovery in demand.

There is some debate over whether the supply of cash in China is getting tighter. The People’s Bank of China (PBoC) decided to roll over just 50% of the funds coming due through 1 of its longer-term policy tools, but offered RMB Yuan 160-B (US$24-B) of 7-day money. Tax dues are increasing demand for liquidity, with April and May peak payment season.

That briefly sent the overnight RRR (repurchase rate) above 3% for the 1st time since Y 2015, though other longer-term rates remain relatively subdued.

RMB Yuan rose to the highest mark in almost 10 months Vs a basket of global peers Thursday, after a stronger fixing from the central bank signaled Beijing is comfortable with the gains.

Have a Happy Easter Weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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