Concerns about the Chinese economy intensified this week.
Now, following the release of Q1 GDP – showing the economy grew at the slowest pace in six years, along with weak industrial production, retail sales and urban fixed-asset investment numbers for March – the calls for additional monetary and policy stimulus are growing.
Picking up on this theme, Morgan Stanley, in an excellent research note after the disappointing data set, had this to say:
“The across-the-board weakening in March activity data suggested downside growth risks still loom large. To prevent further deceleration and labor market instability with a time lag, we expect the policy makers to strengthen the efforts of co-coordinated policy easing with escalation in coverage and reinforcement in implementation. We expect the PBOC to deliver two more rate cuts and more liquidity injection in 2Q. In view of potential capital flow as reflected in money data in March, we believe the window for another RRR cut is open again.“
HSBC also added to the chorus of calls for additional easing.
“Today’s data suggest that underlying growth momentum is already at policy makers’ bottom line, and warrants further policy easing. We expect the PBoC to cut policy rate and reserve ratio in the coming weeks. “
They’re not the only ones suggesting additional policy easing is merely a matter of when, not if.
Yesterday, the Shanghai composite rallied 2.7% and Chinese authorities are well known for announcing policy decisions when the markets least expect it.
Keep an eye on the Chinese markets this afternoon to see if the whispers become a roar.