FXStreet (Barcelona) – Reviewing the Chinese Money and Credit data, Asian Economists at Nomura, view that the PBoC might pause its easing in June, but the slowdown in growth suggests July might see further easing.
Key Quotes
“Money and credit data both rebounded strongly in May. M2 growth rose to 10.8% y-o-y from 10.1% in April (Consensus: 10.4%; Nomura: 10.0%). Aggregate financing came in at RMB1.22trn in May (Consensus: RMB1.133trn; Nomura: RMB1.10trn; April: RMB1.05trn) – our estimated growth of the total stock moderated further to 11.8% y-o-y in May on weaker shadow banking credit growth. New RMB loans totalled RMB900.8bn (Consensus: RMB850bn; Nomura: RMB750bn; April: RMB707.9bn), with growth of outstanding loans edging down to 14.0% y-o-y from 14.1% in April.”
“The stronger-than-expected money and credit data may have helped stabilise industrial production growth in May. As growth stabilises, the People’s Bank of China may pause its monetary easing in June to evaluate the impact of the easing measures it has taken so far.”
“However, growth is still at a low level, with investment demand notably remaining weak. As headwinds to growth are still powerful, we continue to forecast two more 25bp cuts to the benchmark interest rate and two more 50bp reserve requirement ratio cuts over the rest of this year, with July being the most likely timing of the next move.”
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