J.P. Morgan Remains Bearish

The US bank stays bearish on the CNH as the NPC comes into view. It has a short CNH/INR recommendation and short CNH on a reduced basket basis. See below for mroe details.

J.P. Morgan: "China: all eyes on the NPC. While the rally in Chinese stocks has slowed, foreign equity inflows has accelerated further this week with northbound investors adding another $3.3bn, following $1.5bn buying last week. This, however, has yet to translate into any major support for CNY FX, with USD/CNH and CNY TWI staying flattish. The muted reaction is in part related to the fact that CNY FX still look strong especially relative to rates. In the meanwhile, economic data remains a mixed bag, offering limited tailwind for the currency. February PMIs came in stronger than expected mostly led by services. But China’s housing market has shown no signs of rebound despite recent support from policy makers, including the larger-than-expected LPR cut and demand-side easing in key Tier I and Tier II cities. Housing sales in 30 major cities remain at multi-year lows, pointing to still weak sentiment and sluggish demand. Next week officials will convene for the annual two sessions (the NPC and CPPCC), during which policy maker will disclose key economic plans for this year. Among various numerical targets, the GDP growth number and the fiscal budget target would be key focus for markets. Empirically though, the NPC doesn’t presents a clear bullish risk for CNY FX despite that policy tones from these meetings are in general growth supportive. PBoC’s FX operation post-NPC bears watching too as any green-light signaling an ease of FX management could open up room for some catch-up in CNY weakness. We stay bearish and short CNH/INR and short CNH vs reduced basket."