China to cut interest rate by end of year, UBS analyst clashes with broader consensus
- People’s Bank of China is likely to lower its benchmark lending rate by the end of the year, according to Hayden Briscoe, head of fixed income for Asia-Pacific at UBS Asset Management
- Most fund managers do not expect China to go as far as that in its easing policy after last week trimming the reserve requirement ratio by 0.5 percentage points for most banks
China’s surprise dovish tilt last week is only a prelude to an interest-rate cut as economic growth begins to slow rapidly, according to UBS Asset Management, a prediction that clashes with the broader consensus.
The People’s Bank of China (PBOC) is likely to lower its benchmark lending rate by the end of the year to support small and medium-sized companies, a move that will potentially send 10-year bond yields to a record low, said Hayden Briscoe, head of fixed income for Asia-Pacific at UBS Asset Management.
That is a contrarian call as most fund managers do not expect China to go as far as that in its easing policy.
We will see more easing measures later this year, and in late 2022, we will see the real economy pick up
“The PBOC has transitioned from a neutral stance to start an easing cycle, and this cycle has further to go,” Hong Kong-based Briscoe said.
“We will see more easing measures later this year, and in late 2022, we will see the real economy pick up.”
The reduction was flagged a few days previously, when the State Council hinted that policymakers would make more liquidity available so that banks could lend to smaller firms hurt by rising costs.
China’s unexpected flip to an easing stance spooked many investors as it raised speculation the country’s rebound from the coronavirus pandemic may be faltering.