J.P.Morgan Highlight Divergence Of Credit Support In Data

In light of the recently released data out of China J.P.Morgan note that “details of the October credit report show divergent credit support.”

• “Medium- to long-term loans to the corporate sector retreated, and medium- and long-term loans to the household sector contracted, likely more a reflection of renewed weakness in home purchase demand as the impulse from August-September mortgage policy relaxation gradually fades. Shadow credit contracted 257 billion yuan in October, the largest monthly contraction in 15 months.”
• “We estimate that the remaining special LGB quota this year is 133bn yuan. Along with the scheduled 1tn yuan central government bonds issuance before year-end and ongoing special refinancing LGBs issuance, government bonds supply will be relatively heavy in November and December.”
• “We think the PBOC will need to expand OMO/MLF to inject net liquidity into the banking system, and we expect another 25bp RRR cut before the year-end.”
• “Moving into 2024, we expect the PBOC’s monetary easing will continue, with a 10bp policy rate cut in 3Q24 and two RRR cuts (25bp each) throughout the year.”