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policy measures in China

Added 6th March 2015

BlackRock said it sees mainland equity markets becoming more volatile as the country takes further measures to address the slowdown in economic growth.

policy measures in China

Last week, the People's Bank of China (PBOC) lowered its benchmark lending and deposit rates by 25 basis points, bringing the one-year lending rate down to 5.35% from 5.60% and the one-year deposit rate down to 2.50% from 2.75%. This rate cut was the second one since November.

"The cuts were widely expected by the market, however, in our view, the 25 basis point cuts were not as large as they could have been," the fund house said in its most recent weekly market commentary.
“We believe the loosening cycle is still in its early stages and that policies to date are probably insufficient to deal with downward trending economic fundamentals.” 
In early February, the central bank had also slashed the reserve ratio requirements for banks in its attempt to boost credit growth and address the slowing economy.

BlackRock said it sees equity markets becoming more volatile as the country takes further measures.

“Chinese equity markets are likely to become more volatile in coming months, with share prices buffeted between further loosening expectations and weakening fundamentals. However, we believe policymakers still have a wide range of policy tools at their disposal.”

In view of this, the fund house said it is continuing to assess its exposure to Chinese financial sector. 

“We have taken profit on some large positions, including banks, although we remain constructive over the medium term.”

Speaking at the opening of the country's annual parliamentary meeting on Thursday, Premier Li Keqiang set the country’s annual GDP growth target to roughly 7%, which, if met, would be the lowest growth rate for the country over the past 24 years.

China's economy had 7.4% economic growth last year.

Li also said the country will implement proactive fiscal and monetary actions to sustain economic growth.



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