China's stimulus: how many trillion for an equity boost?
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CHINA’S STIMULUS: HOW MANY TRILLIONS FOR AN EQUITY BOOST?
Global markets were quite disappointed this morning as China's broad economic stimulus promises made over the weekend were light on specifics.
However, UBS analysts crunched some numbers to provide ballpark figures about the impact on China's equities, after warning that if Beijing’s “policymakers stay quiet in the coming weeks, we could see the (stock) market take another hit.”
"We think a 1-2 trillion yuan package would present an in-line outcome for the market, implying high single digit upside for China equities from here," says Yifan Hu, regional CIO and head macroeconomics APAC at UBS Wealth Management's Hong Kong branch, excluding potential funding to lift banks' CET-1 ratio from her calculations.
A package exceeding three trillion would likely resulting in “high-teen digit upside,” while one trillion or lower would be a clear downside surprise.
UBS also suggests hedging yuan exposure ahead of the U.S. election as the downside risk would be significant in a Donald Trump victory scenario.
(Stefano Rebaudo)
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MONDAY'S OTHER LIVE MARKETS POSTS:
EUROPEAN STOCK FUTURES STRUGGLE FOR DIRECTION CLICK HERE
CHINA STIMULUS GETS MIXED REVIEWSCLICK HERE
China's fiscal stimulus plan gets muted reaction https://reut.rs/40369kP
Annual change in China’s consumer prices https://reut.rs/3YlIwCu
European shares mostly higher https://reut.rs/3Y32lNS
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