Salient to Investors:
China’s consumer prices rose the least in two years in May and industrial output and retail sales trailed estimates. Industrial production growth was below 10 percent for a second month in May, the first time in three years. Retail sales rose the least in almost six years, excluding January and February holiday months. Fixed-asset investment saw the weakest increase for a January-May period since 2001. The producer-price index declined for the third straight month, the longest stretch of declines since 2009.
Mizuho Securities Asia economist Shen Jianguang said more dramatic easing is urgently needed to avoid a hard landing in the Chinese economy – expect at least one more interest rate reduction and three banks’ reserve requirements cuts this year.
CIMB Research economist Song Seng Wun says growth momentum is slowing, but won’t crash.
Australia & New Zealand Banking Group’s Liu Li-Gang said falling producer prices makes China’s inflation outlook benign but expects another bank reserve requirements cut in June.
Standard Chartered’s Stephen Green expects two 25 basis-point reductions in one-year interest rates in half2 2012, assuming further economic weakness through July and continued difficulties in the eurozone.
Bank of America Corp’s Lu Ting expects the government to start and speed up more projects and make project financing easier by cutting reserve requirements and interest rates, approving more corporate bond issuance and lifting lending restrictions.