China Leading Indicators - First Signs Of A Bottom

Published 02/07/2019, 07:22 AM
USD/CNY
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China outlook

Our view. We look for Q1 to be the low point in the Chinese businend overall USD weaknessss cycle and expect a moderate recovery from Q2.

Leading indicators point to some rays of light

1: Home sales are set to see a lift from lower yields (p.4). Robust construction puts a floor under growth.

2: Commodity prices have increased lately (p.6).

3: Credit impulse is weak but there are signs of stabilisation (p.7).

4: Exports in PMIs have stabilised/rebounded (p.9).

Policy outlook

We look for a US-China deal in March or Q2 to remove a key headwind.

We also expect further stimulus in terms of tax cuts and a further cut in the reserve requirement ratio could also be on the cards in March/April.

Chinese market outlook

Chinese stock markets have stabilised lately. We look for a rally later this year on the back of a gradual economic recovery and less tail risk from trade.

We expect USD/CNY to grind lower towards 6.70 in 12 months on China recovery.

To read the entire report Please click on the pdf File Below..

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