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China: Moderate fiscal stimulus coming as exports improve, imports weaken - Nomura

FXStreet (Delhi) – Research Team at Nomura, suggest that after the lacklustre growth outlook, we continue to expect moderate fiscal stimulus from the central government and continued monetary easing, with one more reserve requirement ratio cut in Q4 and another four in 2016 (each by 50bp), together with two more benchmark interest rate cuts (each by 25bp) in 2016.

Key Quotes

“Export growth improved in September to -3.7% y-o-y in USD terms from -5.5% in August, better than expected (Consensus: -6.0%; Nomura: -8.0%).”

“The better export data could be partially explained by a rather large appreciation of EUR against CNY in September from August, compared to a sharp depreciation of EUR against CNY in August-September 2014.”

“Import growth, however, fell further to -20.4% y-o-y in September from -13.8% y-o-y in August in USD terms, weaker than expected (Consensus: -16.0%; Nomura: -15.0%). As a result, the trade surplus was largely unchanged at USD60.3bn from RMB60.2bn in August.”

“Given the slight recovery in commodity prices, the decline in imports suggests sluggish domestic demand – in particular, investment demand. We remain comfortable with our recently lowered GDP forecasts of 6.7% y-o-y in Q3 and 6.4% in Q4 (both from 6.8%).”

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