J.P.Morgan Look For Modest Easing In Coming Months

J.P.Morgan note that “the second half of July is an important time window for policy re-assessment. We expect further stimulus to include supplementary fiscal support (more likely via policy bank lending and less likely for additional special local government/Treasury bond issuance), further interest rate cuts and nationwide housing policy relaxation.”

• “Amid limited willingness/constraints re: easing, and given the policymaker’s reading of recent history, stimulus in the coming months is likely to be modest.”
• “We expect growth momentum to stabilize and improve in Q3 and Q4.”
• “The PBOC will likely use macro-prudential measures (counter-cyclical factor in daily fixing, FX deposit RRR and risk reverse ratio for FX forward transactions) to manage FX expectations.”
• “Stabilsing the housing market will require both demand-side easing measures to support transactions and supply-side measures to encourage land purchase and new home starts, especially from private developers. The latter is more difficult, and if not addressed, will increase macro and financial risks in the coming years.”
• “Current policy easing measures will be helpful, but may not be sufficient to generate a full return to “normal.” Re-building confidence for private entrepreneurs is critical, and requires political assurance, a stable policy environment and mitigation of external challenges.”