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Modest USD/CNH Uptick, Deeper Property Support Does Little For Yuan

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USD/CNH has edged higher as the broader USD’s recovery from yesterday’s low extends. Spot last ~CNH7.2315.

  • The bull phase from the May 3 low remains in place, with initial resistance located at the May 14 peak (CNH7.2468). A break there would expose the 76.4% retracement of the Apr 16-May 3 bear leg (CNH7.2553).
  • There was little FX impact from the unveiling of the latest round of policy support for the Chinese property sector.
  • The details of the scheme may be deemed a little disappointing (CNY300bn of PBoC funding, which will leverage ~CNY500bn of bank loans), given the sheer size of the housing overhang in China. Still, the PBoC did urge local governments to buy unsold properties.
  • This followed an easing of home purchase restrictions, which allowed property developer equities to rally into the close.
  • Initial analyst reaction has generally welcomed the latest moves, although there still seems to be a feeling that more needs to be done.
  • April’s monthly home price data had already revealed the sharpest M/M drop in nearly a decade.
  • Elsewhere, monthly economic activity data showed a mix of firmer-than-expected industrial production and weaker-than-expected retail sales.
  • This underscored continued pessimism on the part of consumers, as years of economic headwinds continue to make their presence felt.
  • That scarring is seemingly limiting the feedthrough of policy support, with the general public remaining relatively cautious.
  • In turn, that will be providing further headwinds for the property sector and may limit the impact of the property-specific support measures announced to date.
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USD/CNH has edged higher as the broader USD’s recovery from yesterday’s low extends. Spot last ~CNH7.2315.

  • The bull phase from the May 3 low remains in place, with initial resistance located at the May 14 peak (CNH7.2468). A break there would expose the 76.4% retracement of the Apr 16-May 3 bear leg (CNH7.2553).
  • There was little FX impact from the unveiling of the latest round of policy support for the Chinese property sector.
  • The details of the scheme may be deemed a little disappointing (CNY300bn of PBoC funding, which will leverage ~CNY500bn of bank loans), given the sheer size of the housing overhang in China. Still, the PBoC did urge local governments to buy unsold properties.
  • This followed an easing of home purchase restrictions, which allowed property developer equities to rally into the close.
  • Initial analyst reaction has generally welcomed the latest moves, although there still seems to be a feeling that more needs to be done.
  • April’s monthly home price data had already revealed the sharpest M/M drop in nearly a decade.
  • Elsewhere, monthly economic activity data showed a mix of firmer-than-expected industrial production and weaker-than-expected retail sales.
  • This underscored continued pessimism on the part of consumers, as years of economic headwinds continue to make their presence felt.
  • That scarring is seemingly limiting the feedthrough of policy support, with the general public remaining relatively cautious.
  • In turn, that will be providing further headwinds for the property sector and may limit the impact of the property-specific support measures announced to date.