VIEW: Morgan Stanley's most recent musing.....>

CHINA: VIEW: Morgan Stanley's most recent musing re: RRR cuts notes that "the

State Council urged banks to lower lending costs and called for use of RRR cuts

or PBoC relending to keep bank liquidity reasonably ample. We think the next RRR

cut could come as early as the coming week. This affirms our view - unemployment

and disinflation warrant continuing policy support, and recent interbank

liquidity tightening is more of a normalization from an unconventionally low

interbank rate in Mar/Apr. With 7-day interbank rate approaching PBoC 7-day

reverse repo rate (2.20%) and 10-year govt. bond rate reaching a four-month

high, the rate normalization is likely completed. We expect the total net govt.

bond financing to reach CNY4tn in Jun-Sep, PBoC may conduct more MLF

injection/RRR cut to alleviate the crowding-out effect of govt bond issuance,

supporting broad credit growth rising above 13% YoY in coming months (vs. 12.7%

in May and 11% in end-2019)."