China Politburo hints at extra support for economy: UBS

Jul 26, 2023 Newsdesk Latest News, Macau, Rest of Asia, Top of the deck  

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Monday’s meeting of China’s Politburo, a body regarded as important for signalling the country’s intentions, had “set a more supportive policy tone” for China’s economy, including credit supply and the nation’s housing market, says a note from UBS Securities Asia Ltd.

The Politburo meeting “set a more supportive policy tone for the second half of this year,” stated the Monday memo, with comment led by UBS’s Hong Kong-based head of Asia economics and chief China economist, Tao Wang.

“Acknowledging weak domestic demand as a key factor behind current economic difficulties, the meeting called for stronger ‘counter-cyclical’ macro policies to support the economy, accompanied by structural reforms and confidence-boosting measures,” added the institution.

It stated that the messages from the Politburo meeting “around supporting economic growth, promoting private business investment and boosting investor confidence, are broadly positive for market sentiment”.

“The Politburo meeting did not repeat the phrase ‘housing is for living not for speculation’, [and] instead highlighted the significant changes in China’s property demand-and-supply situation and called for adjustment of property policies in response,” said the report.

Investment analysts covering the Macau casino sector have previously noted that access to capital liquidity via the housing market, had been a driver of some demand for Macau gambling among mainland China consumers.

UBS stated in its update on mainland economic outlook: “The notable change in property policy tone will likely give local governments more space to relax or abolish remaining home purchase restrictions, lower down payment requirements for second mortgages, and ease other related measures.”

There has been extensive commentary inside and outside China regarding mainland consumer confidence amid disruption to the global economy by factors including the Russia-Ukraine conflict, as well as China emerging from nearly three years of Covid-19 -related restrictions.

UBS stated, regarding China’s housing market, that central government signals stemming from Monday’s meeting “may also put more political pressure for banks to increase credit support for developers and consider reducing mortgage rates for existing mortgages.”

The institution also noted in its analysis, that the Politburo gathering called for the use of aggregate and structural monetary policy, which in the view of UBS “indicates a more supportive monetary policy stance”.

The bank added: “We continue to expect another reserve requirement ratio cut (25 basis points) and expansion of the People’s Bank of China balance sheet through on-lending or open market operations in the second half, to help ensure sufficient liquidity in the banking system for adequate credit supply.”

The possibility of a fresh fiscal stimulus package by authorities in mainland China could help push up the valuations of Macau casino stocks, suggested a June note from U.S.-based CBRE Securities LLC.

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