Salient to Investors:

  • UBS said it will take a deeper slowdown to spur an interest-rate cut and still expects growth to be below 7% in Q4. Wang Tao at UBS said the bias is toward more but relatively measured easing and growth will slow further in Q4 on further property construction weakness.
  • Chang Jian at Barclays said the PBOC’s targeted easing since June have had a limited impact on the broader economy and only temporary effects on liquidity and stocks, and that the expected targeted easing measures won’t stop the moderating momentum. Chang and Louis Kuijs at RBS lowered growth forecasts. The median economist in August expected China to slow to 7.2% in 2015 from a projected 7.4% in 2014.
  • Lu Ting at Bank of America said Premier Li will be forced to significantly step up’ stimulus measures in coming weeks to arrest the slowdown.
  • JPMorgan Chasesaid the fact that the PBOC used the SLF instead of a cut in reserve requirements suggests that it does not want to send a signal of monetary easing,
  • Julian Evans-Pritchard at Capital Economics said China wants to avoid too much credit expansion as it transitions to a more services-based economy.
  • Tim Condon at ING sees the issue as more technical related to money-market liquidity than a macro policy move.

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