Think Chinese stock and property markets are a bubble? You haven’t seen nothing yet according to Bank of America Merrill Lynch.
Wait until real interest rates go negative due to rising inflation butting against ultra-stimulative interest rates.
Business Week: “Next year could be the year we see a full-blown asset bubble,” David Cui, the China strategist at Bank of America Corp.’s Merrill Lynch unit, said today in a phone interview from Sydney. “We’re likely to see massive savings migration as we head into real negative interest-rate territory,” where people “save less, spend more and invest more,” he said.
Interest on bank savings accounts may fall below the rate of inflation next year. Consumer prices climbed 0.6 per cent in November from a year earlier, snapping a nine-month run of deflation, and prices may rise 3 per cent in the first quarter, driving more savings into equities, the China Securities Journal said in a front-page editorial today. The 12-month savings deposit rate is 2.25 per cent, central bank data showed.
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