Heightened Expectation Surrounding Imminent PBoC Easing In Wake Of State Council

A reminder that speculation/expectation surrounding a potential RRR cut from the PBoC is elevated after Wednesday's State Council meeting guided towards such a move. Many expect the PBoC to act after local market hours on Friday.

• On that matter, our Beijing team picked up on the following story on Friday, highlighted in our daily China Press Digest: “The urgent need to cut banks’ reserve requirement ratio is rising as China should move to stabilise growth in Q4, which is the biggest contributor to yearly growth, China Securities Journal reported on its front page. A 25-50 bp cut to release CNY500 billion to CNY1 trillion in medium and long-term funds can be expected, the newspaper said citing CICC analyst Lin Yingqi. A RRR cut will send an easing signal and reduce banks’ capital costs, which may drive down banks’ December quotations on the 5-year Loan Prime Rate that they price mortgages on, the newspaper said citing analysts. Residential loan growth remains sluggish, with the property sector set to become an important destination for banks’ credit, the newspaper cited analysts as saying.”