Oliver's Twist | Signals out of Beijing this past week don’t bode well for China stocks
Preliminary PMI survey data put out by HSBC and Markit showed growth momentum among manufacturers extended its rebound into October, marking the third-straight month of gains, while housing prices in leading cities continued to pick up. But be wary of reading good news into the figures.
A few months back concerns had been on slowing momentum and the need for credit loosening. The policy easing that followed helped to fuel a rally in mainland stocks underway since June.
Indications that growth momentum is now back on track likely adds up to a policy reassessment towards a chillier credit backdrop in the months ahead, according to Société Générale strategist Wei Yao in Hong Kong.
“Seeing growth stabilising, policymakers seem to be shifting their focus back to risk management,” Yao said in a note to clients on Thursday.
Seeing growth stabilising, policymakers seem to be shifting their focus back to risk management
Indications of tightening can already be seen in moves to cool property prices in the nation’s capital, unveiled by Beijing’s municipal government on Wednesday.
The plan, which will include construction of around 70,000 homes over two years, will likely be copied by other municipalities, according to Yao. She expects other big cities to unveil similar supply-boosting measures in coming months.