China is one of the key markets that we monitor closely. China takes the lead over the US with an interest rate cut. The latest rate cut will be one of the topics that will be discussed with a team based in Hong Kong later today.
I do not see any reasons to be bearish and I expect more “surprises” ahead as China moves to support growth. As for the stock market strategy, as I have told some people, the market cannot go down much when everybody is already so bearish. This article from CNBC may be of interest.
Here is a section:
China surprised markets by lowering a key short-term policy rate and its benchmark lending rates on Monday, in efforts to boost growth in the world’s second-largest economy.
The cuts come after China last week reported weaker-than-expected second-quarter economic data and its top leaders met for a plenum that occurs roughly every five years.
The country is verging on deflation and faces a prolonged property crisis, surging debt and weak consumer and business sentiment. Trade tensions are also flaring, as global leaders grow increasingly wary of China’s export dominance.
The People’s Bank of China (PBOC) said on Monday it would cut the seven-day reverse repo rate to 1.7% from 1.8%, and would also improve the mechanism of open market operations.
Minutes later, China cut benchmark lending rates by the same margin at the monthly fixing. The one-year loan prime rate (LPR) was lowered to 3.35% from 3.45% previously, while the five-year was reduced to 3.85% from 3.95%.
“The cut today is an unexpected move, likely due to the sharp slowdown in growth momentum in the second quarter as well as the call for ‘achieving this year’s growth target’ by the third plenum,” said Larry Hu, chief China economist at Macquarie.
Ju Wang, head of Greater China FX & rates strategy at BNP Paribas, said that rising expectations for the Federal Reserve to start cutting interest rates also gave the PBOC room to maneuver its monetary easing.