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CHINA: Yesterday’s Market Surge And the Expectation of Stimulus. 

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets
  • Yesterday’s equity market reaction gave an interesting insight as to the potential volatility to be expected following the US election results.
  • There is much speculation as to what announcements (if any) could come out of the press conference in Hong Kong today following the National People’s Party Congress.
  • The market has speculated that debt ceiling adjustments by the Central Government could be in a range from CNY6tn to CNY10tn.
  • The purpose of the additional funding would be to encourage local governments to bring off balance sheet debt on balance sheet to increase transparency, and decrease their funding costs.
  • Local government budgets have been decimated by the real estate sector decline.
  • Some local government’s fiscal positions are so challenging that at times there has been an inability to fund the general government obligations.
  • As President Xi outlined in the Third Plenum in July, China’s long term economic strategy is to shift capital away from such a heavy reliance on real estate and infrastructure into high tech manufacturing.  A fact not lost this week by his comments from Wuhan where he encouraged technology entrepreneurs.
  • The policies announced since September has been aimed at stabilizing the economy and may challenge the market's expectations for further stimulus announcement today.
  • Financial markets seem to expect a big announcement today from Hong Kong.   
  • Whilst that remains a possibility, given the looming trade war and tariffs coming China’s way, there is just as bigger chance that today’s announcement may not be as large to maintain some policy space for the years ahead. 
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  • Yesterday’s equity market reaction gave an interesting insight as to the potential volatility to be expected following the US election results.
  • There is much speculation as to what announcements (if any) could come out of the press conference in Hong Kong today following the National People’s Party Congress.
  • The market has speculated that debt ceiling adjustments by the Central Government could be in a range from CNY6tn to CNY10tn.
  • The purpose of the additional funding would be to encourage local governments to bring off balance sheet debt on balance sheet to increase transparency, and decrease their funding costs.
  • Local government budgets have been decimated by the real estate sector decline.
  • Some local government’s fiscal positions are so challenging that at times there has been an inability to fund the general government obligations.
  • As President Xi outlined in the Third Plenum in July, China’s long term economic strategy is to shift capital away from such a heavy reliance on real estate and infrastructure into high tech manufacturing.  A fact not lost this week by his comments from Wuhan where he encouraged technology entrepreneurs.
  • The policies announced since September has been aimed at stabilizing the economy and may challenge the market's expectations for further stimulus announcement today.
  • Financial markets seem to expect a big announcement today from Hong Kong.   
  • Whilst that remains a possibility, given the looming trade war and tariffs coming China’s way, there is just as bigger chance that today’s announcement may not be as large to maintain some policy space for the years ahead.