China’s Policy Pivot Has Traders Wondering How Far It Will Go
- Central bank lowers required reserve ratio for banks
- Politburo adopts more dovish tone, Macquarie’s Hu says
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As Chinese economic policy makers shift toward easing mode, the question on traders’ minds is how far the government is prepared to go.
Financial markets are showing some expectations of further easing after the People’s Bank of China said it will cut the amount of cash banks have to hold in reserve. Turnover has climbed to an 18-month high on a popular tool used by traders to finance their bond purchases, a sign of increasing leverage. Government-bond yields are near a three-month low. A gauge tracking Chinese developer shares rallied more than 3% on Tuesday after the Politburo signaled a loosening of curbs on real estate.