由于公众号更改了推送规则，请将本公众号设为“星标⭐”，多点文末右下角的“在看”，让您在房产江湖中运筹帷幄、执掌乾坤。
Chinese stocks of Swords since policy makers announced a broad stimulus package. Our more gains ahead. This is the markets. l'm Chris, l see with Goldman Sachs research and my guest is Luz. Son, a senior Asia macrostrategist. In our Global banking and markets business. She joins us from Hong Kong. Lou thanks for making the time on what must be a very busy week for you.
Great to be here. Hi Chris. Alright, let's start with the basics. What drove the stimulus announcement and what's in the package. Yeah sure. So you know following the much weaker than expected, GDP data uh from second quarter and also the FED cut 50 business point. l think overall this gives China a lot more policy room and it seems that the top Authority has decided that the policy put is triggered given how week the domestic rose has been so far.
We got details from monetary site property policy non-equity and most of them are above market expectation. In particular, monetary the amount of rate cut and people are cut are two times or what market originally expected and on property as well. Not only they cut inventory, mortgage by 50 business coins in last few days. Healthier cities in China, all announced easing of homework purchase restrictions since which led to immediate rebound of the property transaction.
Ending Equity is the first time in recent history that's previewc. Announced director lending to Market for them to buy equity via two facilities. They also talk about potential stabilization fund and also they want to channel more long-term funds suspension Etc into the equity market. So l think overall the package has been above market expectation. Tell you that the policy put has been triggered from the very top authority and the next one to watch is really physical down the road.
All right, so a policy put above market expectation, but we also know that Chinese economy has been grappling with some pretty significant issues. Who's how much can this stimulus help fundamentally? ls it enough?
Yeah, l think that's definitely a very pressing uh, question. Among the already announced policy, especially in the monetary and property the GR economist estimate around 40Bism boost to growth. Now, these are still pretty much supplies that ls meaning that they're just making funding cheaper and easier for markets, but what we really need is demand side policy, especially on fiscal, which is what the market is waiting for. And there has been a lot of reports in particular.
There's one report by Reuters, they're saying they're going to do two trillional special cgb among which one trillion will focus on consumption, which is very important. There's also a market news talking about additional 1 trillion, special ccdb to how recap the large Banks, which if that gets realized will be the first time,they do that as the GFC.
So l think, if these kind of reported news get realized on the fiscal side, l expect a mile rebounding growth in fourth quarter and first quarter next year as that continue to do relatively well, especially the property Market is still in Decline. Even after the mortgage rate cuts the cost of funding in the mortgage Market of two percent, is still higher than the rental yield in top, tier city, which is below two percent. So, l think we're still adjusting and l think for upside surprise, We really need a more fiscal more demand side measures than what Marcus currently expecting.
Okay. So we still need more, but it does seem like we did get something of an upside surprise markets were up a lot. Were you surprised by the extent of the reaction in Chinese, stocks and bonds?
I think the coming into the stimulus Market was extremely bearishly positioned on China. lf you look at our Prime book hedge fund allocation to Chinese Equities has fallen to volte year laws and mutual fund is very underweight China.Everybody you talk to Angshu offshore very fast. Rally is short covering and especially on the line only side. We keep seeing them buying given the out performance of a Chinese actually is very painfu lto their anyway positions in China. And H1 has participated from very early on.
l'll say from the Tuesday monitoring announcements, the foreign really started participate very early on and we already seesome sign of profit taking what l think is very interesting is the actual animal Spirit has returned for the equity Market for the first timesince 2020. And 2021, I would say there have been very local news reporting that the amount of account opening is reaching very high level, even during the golden week, that a lot of the security houses. Working extra days to help people open accounts. So this will still have legs.
Probably the fastest phase of rally has is behind us but l think the Bears positioning is still adjusting and most importantly, l think the outro positioning onshore and most spirit will be the, the more important driver going forward.
All right, so does that imply that we have not gone too far too fast.
lt's just going to take a long time to erase a decade of under performance. So if you look at the recent change evaluation, the T ratio has increased from eight times in early September to currently 11 times, which is almost back to the high of the reopening line level, like, January 2023. So l wouldn't say it's stretched, given the offshore momentum is gathering. l would expect we could have further room and momentum itself.
Recent rallyis, showing the strongest momentum since 2001. And historically, when we see such virus from momentum from low to high, we have seen Chinese Equity rally either 50 or sometimes in Cases are over 100 percent in 2014 and 2015. So yeah l think at this moment authorities are probably happy given a lot of their measures are geared towards the equity market and l think it's too early for them to put it to a stop or say that any bubble. There's l think the valuation is not stretched. So l think this is likely to continue to have legs. Although it's also unrealistic to have eight percent rally every day. So l would expect some of the early participants from Ultra hash clown to take some profits. And so, the rally may slow down somewhat.
Now you mentioned that local Chinese are opening up newbrokerage accounts but what's the role do you think Chinese equities can play in portfolios of international investors in the U.S in particular? Should investors now be making room for China again?
Definitely l think the real long-term money participation in China is still pretty low for either Equity or stocks given the concern about your political risk and also political as policy, Uncertainty. How l would like to point out that throughout recent years? China is parity has done. Well, if you learn both Bond and Equity with the right ratio in general, it's been working. Well, this is because China does not have inflation so that the policy responds can be more geared towards growth. And if that's not efficient, then bond market will rally to express further easing, potential down the road. So l think China is parody. Plus long equity is a pretty good option to have in the portfolio. Most importantly, it has unique diversification benefits given highness Coalition to Globalbonds, and Equity is very low like recent years. The bound beta to U.S race is essentially zero and also very minimal for our Equity as well.
Great point. Last question for you Lulu. As you mentioned, it is golden week. This week, an annual holiday where people take the whole week off in mainland China, but folks will be back next week, what are you going to be watching out for next week?
Yeah, sure.
First. ls that the activity data out of golden week because we've seen this massive Equity rally. The vows effect May translate into better consumption data and also the property sales has already seen some uptick in recent days, following the poverty policy relaxation, a mortgage ratecut. So we need to see the property transaction data. Whether it's is going to look a lot better than the previous weeks. l think that will give us some early indicator about the policy, Effectiveness, or the wealthy fat, from the equity rally.
And the second is really fiscal. As l mentioned, a lot of the announced measures are supplies. l measures and market will be kingly waiting for demand Sensei measures AKA physical. So l think the fiscal quota will be out as soon as end of the golden week but can also Another month until the next national people's Congress standing committee. So yeah, l think these are will be the key Market drivers in the next few weeks.
Great stuff. Watch the data, watch the policy. Lou. Thanks so much for joining us.
Great pleasure. Thank you.
你 “在看” 我吗？
