Morgan Stanley Has A Contrarian Prediction For China

beijing china

Photo: Wikimedia Commons

This weekend’s PMI reports aside, the overwhelming sentiment towards China this year is one of pessimism, as a hard landing is seen as a distinct possibility.But not everyone is pessimistic.

In a report put out in the middle of last week, Morgan Stanley’s┬áHelen Qiao actually raised her firm’s 2012 China GDP forecast from 8.5% to 9.0%.

We break down the key points here:

  • Already the China has been easing policy all over the place to stimulate the economy, but so far it’s been relatively ineffective.
  • However, there’s more the PBOC can do on the monetary front, including rate cuts, to goose lending. Specifically, Morgan Stanley is calling for a 25 basis point cut to the benchmark lending rate.
  • Furthermore, expect to see the resumption of government infrastructure projects.
  • There’s growing evidence that after strong attempts to cool the property market, that pro-real estate measures will be put in place, specifically with the aim of supporting first-time home buyers. In early March, the heads of the 5 biggest bnaks were called together for a meeting on facilitating homebuying.
  • Fixed Asset Investment, centered on technology, utilities, and housing will grow 21% this year, vs. previous estimates of just over 10%.

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