Invesco, Nomura pour cold water over chances of China’s Politburo launching massive stimulus package

The Politburo is due to meet by the end of July to review China’s first-half economic performance and set the policy tone for the rest of the year

The June data ‘suggests a lower probability of robust stimulus measures’, Invesco says

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New members of the Politburo Standing Committee, front to back, President Xi Jinping, Li Qiang, Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang and Li Xi arrive at the Great Hall of the People in Beijing in this file photo from October 2022. Photo: AP

Published: 4:00pm, 18 Jul 2023Updated: 5:06pm, 18 Jul 2023

Investors hoping for potent stimulus measures from the coming Politburo meeting might be in for disappointment, after key data for June flashed some positive signals for China’s economy.

The June economic data has not deteriorated to an extent that would trigger large-scale rescue measures from top policymakers, who are wary of the side effects of leveraging and are more focused on sustainable and high-quality growth, according to US asset-management firm Invesco and Japanese brokerage Nomura Holdings.

President Xi Jinping and his 23 colleagues in the Politburo are due to convene a meeting by the end of July to review China’s first-half economic performance and set the policy tone for the rest of the year.

“The June data, which shows stabilisation across most sectors, suggests a lower probability of robust stimulus measures,” said David Chao, a strategist at Invesco. “The decision by China’s central bank to hold policy rates unchanged is a good example of this,” he said, referring to the one-year rate on the medium-term lending facility that was left unmoved on Monday.

The Politburo meeting is on stock traders’ radars, and they will look for any clues on how Xi’s government will steer the world’s second-largest economy out of a slowdown after growth momentum has moderated. Piecemeal measures aimed at reviving growth – from 10 basis-point cutbacks in borrowing costs to loosening of the property market in smaller cities – have so far failed to impress investors, with benchmarks of both onshore and offshore stocks lagging other key markets in Asia.

The CSI 300 Index dropped 0.4 per cent on Tuesday, extending the 0.8 per cent drop recorded a day earlier, while the Hang Seng Index slid 2.1 per cent as trading resumed after being suspended because of a typhoon in Hong Kong.