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.
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