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- China is injecting $150 billion into the economy — that may fuel a short-term rally - UBS
China is injecting $150 billion into the economy — that may fuel a short-term rally - UBS
CNBC reports that according to investment bank UBS, China’s move to cut the amount of funds banks need to hold in reserve could boost market sentiment — and that could be good news for stocks in certain sectors,
The People’s Bank of China said Friday it would cut the reserve requirement ratio (RRR) by 50 basis points for all banks, effective from July 15. The move is expected to release around 1 trillion yuan (or $154 billion) in long-term liquidity into the economy.
“We think this broad-based RRR cut could boost market sentiment in the short term and improve stock market liquidity,” UBS analysts Lei Meng and Eric Lin said in a note on Monday.
In the short term, the move could boost liquidity-sensitive sectors, such as aerospace and defense, electronics, IT and media, according to UBS.
Companies with strong earnings expectations could also outperform, UBS said, citing sectors such as electric vehicles and batteries, and the new energy sector.
However, the market rally may be short-lived given concerns over China’s slowing economic growth, the bank indicated.
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