29 Apr 2015
China: no quick rebound in sight yet – Nomura
FXStreet (Barcelona) - Research Analysts at Nomura, use their proprietary indices gauging China’s economy and policy to forecast a slowdown in real GDP growth to 6.6% yoy in Q2, and further anticipate three 25bp interest rate cuts in 2015.
Key Quotes
“In the near-term, these indicators, together with a falling HSBC flash PMI in April, suggest growth momentum will remain weak, at least through April. We maintain our forecast for real GDP growth to slow to 6.6% y-o-y in Q2 from 7.0% in Q1.”
“The continuing downtrend in growth is pressuring authorities to loosen monetary policy further in May, after the recent 100bp cut to bank reserve requirement ratio (RRR) in April.”
“Our MPSI flash reading, -0.62, indicates a still-high probability of policy loosening in May, similar to the final reading (-0.64) for April.1 Interestingly, the MPSI’s signal for more monetary policy easing is almost as strong as it was at the height of the global financial crisis. The easing in May will be performed via a benchmark rate cut, if past practices apply (the People’s Bank of China (PBoC) tends to alternate interest rate and RRR policy moves).”
“Based on the weakening momentum shown in economic indices and the high likelihood of easing indicated in the policy signal index, we maintain our policy forecast of substantial more policy easing, with three more 25bp benchmark rates cuts and two more 50bp RRR cuts over the remainder of 2015.”
Key Quotes
“In the near-term, these indicators, together with a falling HSBC flash PMI in April, suggest growth momentum will remain weak, at least through April. We maintain our forecast for real GDP growth to slow to 6.6% y-o-y in Q2 from 7.0% in Q1.”
“The continuing downtrend in growth is pressuring authorities to loosen monetary policy further in May, after the recent 100bp cut to bank reserve requirement ratio (RRR) in April.”
“Our MPSI flash reading, -0.62, indicates a still-high probability of policy loosening in May, similar to the final reading (-0.64) for April.1 Interestingly, the MPSI’s signal for more monetary policy easing is almost as strong as it was at the height of the global financial crisis. The easing in May will be performed via a benchmark rate cut, if past practices apply (the People’s Bank of China (PBoC) tends to alternate interest rate and RRR policy moves).”
“Based on the weakening momentum shown in economic indices and the high likelihood of easing indicated in the policy signal index, we maintain our policy forecast of substantial more policy easing, with three more 25bp benchmark rates cuts and two more 50bp RRR cuts over the remainder of 2015.”