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3 Apr 2014
Asia EM Express: China's government announces mini-stimulus package to boost growth
FXStreet (Łódź) - On Thursday China's Premier Li Keqiang announced a mini-stimulus package aimed at increasing spending on railways and other construction projects, which confirmed market expectations that the Chinese government is looking for ways to boost the slowing growth in the country. Asian stocks advanced on the news.
Apart from speeding up railway construction, the package, which will be financed from selling 24 billion dollars worth of bonds, includes small business tax cuts and plans of shantytown renovation.
“We must roll out policies that spur businesses’ vitality, effectively increase demand and boost jobs,” the State Council said. They added that investment and consumption would grow thanks to “accelerating shantytown transformation and getting millions of residents into modern buildings.”
In the opinion of Tim Condon, Head of Research-Asia at ING, “the news of the announcement the lessening of the likelihood of a resort to go-stop monetary policy, which is positive for all EM risk assets.”
Zhiwei Zhang from Nomura predicts that China's “both monetary and fiscal policies will be loosened in Q2.” He sees “a cut in the reserve requirement ratio by 50bp in Q2 and another cut in Q3,” and adds that “the likelihood of an interest rate cut is rising as well.”
Economic data
On Wednesday and Thursday various countries in Asia released March PMI data. In China the Non-Manufacturing PMI decreased to 54.5 from 55, while the HSBC Services PMI ticked up to 51.9 from 51. These were not market movers.
The Singaporean PMI dropped slightly to 50.8 from 50.9. The Hong Kong Manufacturing PMI fell into contraction at 49.9, following a 53.3 reading. Indian HSBC Services PMI contracted further to 47.5 from 48.8.
On Thursday also the Thai Consumer Confidence was released with the numbers showing a slight deterioration in March to 68.8 from 69.9 in February. It was the twelfth running month of declines in the indicator, hit by the continuing political tensions in the country.
Technicals
The Chinese yuan fell against the dollar on Thursday, as the PboC fixed its mid-point 0.04% lower at 6.1520, signaling that it intends to make 6.2 a ceiling.
USD/CNY rose by 0.02% to 6.2068. The daily FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was neutral at 65 at the last close. Daily 2-StDev Volatility Bandwidth was expanding at 353 pips, with ATR (14) shrinking at 146 pips. The 1D 200 SMA was at 6.1079, while the 1D 20 EMA was at 6.1840.
Apart from speeding up railway construction, the package, which will be financed from selling 24 billion dollars worth of bonds, includes small business tax cuts and plans of shantytown renovation.
“We must roll out policies that spur businesses’ vitality, effectively increase demand and boost jobs,” the State Council said. They added that investment and consumption would grow thanks to “accelerating shantytown transformation and getting millions of residents into modern buildings.”
In the opinion of Tim Condon, Head of Research-Asia at ING, “the news of the announcement the lessening of the likelihood of a resort to go-stop monetary policy, which is positive for all EM risk assets.”
Zhiwei Zhang from Nomura predicts that China's “both monetary and fiscal policies will be loosened in Q2.” He sees “a cut in the reserve requirement ratio by 50bp in Q2 and another cut in Q3,” and adds that “the likelihood of an interest rate cut is rising as well.”
Economic data
On Wednesday and Thursday various countries in Asia released March PMI data. In China the Non-Manufacturing PMI decreased to 54.5 from 55, while the HSBC Services PMI ticked up to 51.9 from 51. These were not market movers.
The Singaporean PMI dropped slightly to 50.8 from 50.9. The Hong Kong Manufacturing PMI fell into contraction at 49.9, following a 53.3 reading. Indian HSBC Services PMI contracted further to 47.5 from 48.8.
On Thursday also the Thai Consumer Confidence was released with the numbers showing a slight deterioration in March to 68.8 from 69.9 in February. It was the twelfth running month of declines in the indicator, hit by the continuing political tensions in the country.
Technicals
The Chinese yuan fell against the dollar on Thursday, as the PboC fixed its mid-point 0.04% lower at 6.1520, signaling that it intends to make 6.2 a ceiling.
USD/CNY rose by 0.02% to 6.2068. The daily FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was neutral at 65 at the last close. Daily 2-StDev Volatility Bandwidth was expanding at 353 pips, with ATR (14) shrinking at 146 pips. The 1D 200 SMA was at 6.1079, while the 1D 20 EMA was at 6.1840.