UBS was not impressed by China’s stimulus announcement on Tuesday. In a summary of the note:
- The announcement marks a positive step towards a more supportive approach.
- But it does not match the scale of previous stimulus efforts that have led to sustained market rallies.
- Monetary easing by itself will not be enough to end the current cycle of deflation and deleveraging.
- Increased financial support is necessary.
- Further fiscal stimulus could be on the cards in October through the budget review, especially if third-quarter GDP remains well below the 5% mark.
On the foreign exchange front, analysts at the bank recommend hedging exposure to the yuan as the US election approaches. Their preferred currency is the Australian dollar, which stands to benefit from China’s actions.
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previously:
- Economists say “no” to China’s economic stimulus package, it’s “not enough”!
- China’s stimulus lifts global growth outlook, but raises inflation risks again
- Boosting China’s Economy: JPMorgan Identifies Key Policy Needs
This article was written by Eamonn Sheridan on www.forexlive.com.