Is it a Chinese “bazooka” or not?
Media reporting has been so bullish that one would have thought so. Some highly regarded strategists also think so. Michael Hartnett at BofA for instance:
China stimulus: RRR cut 50bps (lowest since Feb’07) = 1tn yuan ($142bn) in bank liquidity; cuts in mortgage rates = 150bn yuan ($21bn) savings for households; 2tn yuan($284bn) government debt issuance per market expectations to stimulate consumer (cash handouts) & local governments; 800bn yuan ($113bn) liquidity for stockmarket…potential $560bn of stimulus for China (>3% of China $18tn GDP); occurs as investors most UW commodities since Jun’17 see Sep’24 Global Fund Manager Survey & Chart 11), China bond returns at all time high vs US Treasuries, China stocks at 50year low vs US stocks, China property stocks at GFC lows, and so on; positioning shows unloved commodities (industrial metals), materials & International stocks (EM & EAFE–Chart 4 & Table 1) best rotation “Breadth” play so long as China stimulus means 2% new “floor” for China 10 year yields.
