Monday saw ANZ note that "in China, banks.....>

CHINA: Monday saw ANZ note that "in China, banks play the role of custodian for

investors, holding clients' funds for safekeeping. So the run-up in the equity

markets will not release additional funds from the banking system, but rather

convert household and corporate deposits to non-banking financial institution

(NBFI) deposits. As a result, interbank liquidity will be improved, thanks to

the zero required reserves ratio (RRR) on the deposits of NBFIs. This will in

turn benefit the index performance via margin trading financed by interbank

funds, because most brokerages can borrow from the banking system. To Chinese

policymakers, the stock rally is actually a double-edged sword. It is helpful to

curb the corporate leverage ratio and relieve the fiscal pressure, but concerns

will increase over financial risks stemming from a plunge in the benchmark

index. The People's Bank of China (PBoC) will likely adjust its pace of easing

(but not change its easing stance) and pay more attention to risk control, in

our view."