FXStreet (Barcelona) – Tim Condon of ING, expects more market-support measures until the panic selling halts, and further adds that the only thing that will halt is a re-pricing for more PBOC easing.
Key Quotes
“Last night the CSRC announced that it would no longer require brokerages to force clients with insufficient collateral to sell stock and would allow “reasonable rollover” in margin trading. The Shanghai and Shenzhen stock exchanges also announced a 30% cut (to 0.487bp from 0.696bp) in the A-share securities transaction fee from August 1.”
“The moves followed yesterday’s 5.2% drop in the Shanghai Composite yesterday, which followed a 2pm margin call deadline. We think the authorities will continue to promulgate market-support measures until the panic selling halts. The only thing we are confident will halt it before the index falls to 2000 (latest 4010) is a re-pricing for additional PBOC easing, which we continue to believe will be needed to hit the 7% GDP growth target.”
“We do not think fiscal stimulus will be enough. Yesterday the NDRC released another batch of investment projects. The 3.1 trillion yuan the agency said it spent on government investment projects through May – 18% of total fixed asset investment (FAI) – didn’t prevent investment growth from slowing to 11.4% YTD in May from 15.7% in 2014. The release of investment projects has coincided with a pick-up in the number of newly started FAI projects, which we expect will translate into stronger investment growth, though this may depend on progress with the local government debt swap.”
(Market News Provided by FXstreet)