Goldman Dig Into Chinese Equity Performance In Post Previous RRR Cuts

Goldman Sachs note that “the RRR cut could help replenish system-wide liquidity and is usually welcomed by the equity markets.” They examined equity performance after “the PBoC announced RRR cuts in episodes since 2015 and note that China markets have tended to perform well in the week after the announcement of RRR cuts, delivering 0.5% weekly returns on average. Comparatively, the markets have tended to perform better when the PBoC announced broad-based RRR cuts, relative to targeted RRR cuts. The China A-share market has tended to be more sensitive to policy stimulus than the offshore market. Sectorally, Energy and Communication Services were the best performing sectors in the week after RRR cut announcements, while Consumer Staples usually underperformed.”