Waiting for action

Efforts to stabilise China’s financial markets have been a short term success. Although in aggregate March was one of the worst months on record for portfolio outflows from onshore markets, there were signs of a shift after Vice Premier Liu He’s promise of more market-friendly policies. Equity markets have lifted from their lows too. It remains to be seen though whether “market-friendly” amounts to anything more than clearer communication. In a similar vein, investors are waiting for policymakers to follow through on promises of greater support for the economy. The State Council this week said that measures to stabilise the economy will be introduced soon and the PBOC separately pledged “greater support for the real economy”. While we think that investors hoping that Liu was signalling a change of direction in regulatory policy will be disappointed, we do expect added cyclical support soon.