VIEW: Goldman Sachs: RRR Cut In Q4 Less Likely

Goldman Sachs note that "on Friday (Oct 15), the PBoC held a press conference on Q3 money and credit data. During the conference the PBoC responded to market concerns on property financing and Q4 monetary policy stance. In sum, the PBoC confirmed the incremental monetary policy easing on property financing, and by stating that "liquidity conditions would remain stable and the PBoC would use MLF and OMO to adjust liquidity conditions.""

• "We think such remarks lower the chance of an RRR cut in the rest of the year and we no longer expect such a cut in our baseline projection. As we discussed before, given the large amount of maturing MLF in the rest of the year, an RRR cut might serve as a tool to replace MLF and thus has little net impact on overall liquidity. Amid tight regulations on property financing, shadow banking, and local government borrowing, as well as increased supervision on anti-corruption, credit demand has remained soft. Barring major easing in these regulations, monetary policy easing such as cutting RRR and lowering interest rate might only provide incremental help on overall credit growth. Having said that, with more than CNY1tn of government bonds scheduled to be issued in both October and November, we may still see modest acceleration in overall TSF growth in October and November."