China’s leadership is growing concerned that loose monetary policy is fuelling an overheated stock rally, raising the risk that the People’s Bank of China may delay fresh easing measures.
Regulators are wary of repeating the 2015 equity market crash, which wiped out $6.8 trillion in value. While some economists still anticipate a modest rate cut before year-end, banks including Citigroup and Nomura warn that the PBOC may refrain from lowering interest rates or cutting reserve requirements to avoid pumping additional liquidity into markets.
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Watch for impact from this, potentially:
- hawkish for RMB in near term
- equity rally momentum at risk if easing is delayed
- spillover to Asian FX and commodities demand
This article was written by Eamonn Sheridan at investinglive.com.
