China's Unveils Stimulus Blitz | Bloomberg: The China Show 9/24/24

9 a.m. in Beijing, where the heads of the central bank as financial regulators are about to hold a rare joint briefing. This just a day after they cut that 14 day reverse repo. More stimulus ahead. That certainly is a question this hour. Just half an hour away from the market opens in Shanghai, Shenzhen and Hong Kong. You're watching the China show. I'm Yvonne Man with David English. We are waiting with bated breath as markets are, of course, looking ahead to potential stimulus announcements from that briefing in Beijing, even as authorities face a high bar for

any measures to have a lasting impact. Speaking of policy and dovish news, traders are also weighing these dovish commentary coming out of Fed officials, With several leaving the door open for more super sized interest rate cuts. Plus, growing fears of a wider Middle East conflict after Israeli Israeli strikes killed hundreds in Lebanon. But before that press briefing gets underway, of course, I do a bit of a market check here, but there is a lot of anticipation that we might get something out of these three here this morning. Certainly that is what markets are pricing in

for. We will take a look at some of these ETFs that happened overnight. The US listed Chinese ones just a bit here, but stock because there you go. We're continue to see this party going post fed and we are actually getting very close if not there today. Those two year highs for Asia stocks as well. Japan coming back online and catching up in a big way. We're up some 1% and really reacting to that weaker yen story here as well with a 143 handle here this morning. Also watching the RBA meeting that could be having

not much really in terms of policy settings, but could keep that Aussie dollar pretty bit up here. Leading up to that, you take a look at how Treasurys are doing. We're seeing yields slightly lower here. It really is The Fed spooked that we got all the way from Goolsbee to to Bostic to Kashkari, you know seems to be supporting this trajectory of more rate cuts here. Goolsbee sees many more rate cuts over the next year, two more quarter point cuts from Kashkari before year's end. And then we continue to watch very closely what happens with

us. Futures were slightly in the negative territory, but Brent, markets obviously with what's going on the Middle East, I will focus on that just a little bit Here. Those Lebanon strikes and iron ore catching up a bit here, up some 2%. We mentioned about all these stimulus hopes. You saw that yesterday once they did sort of announce that 14 day reverse repo cut. Yes, it was a catch up to what we saw back in July. But then again, the fact that they announced this meeting at 9 a.m. prime time just before markets opened the day

before the MLF, that certainly is signs that maybe that they're ready to unleash some more stimulus here. You saw that through these ETFs that track China from Web. The like was up some 2%. The Nasdaq gold, the Dragon was also up more than 1% here today. It sets up for a pretty good open here today. We'll see if there's any sort of news That comes out that new markets react to. But we already seen futures punching higher here this morning. CGP yields are ten years at a to 0.03 handle. That's a record low here. Right

now. CSI 300 is up for two straight days of the longest win streak we've seen in about two months or so. So certainly that's one to watch in the currencies. 705 against the dollar days. Yeah, I have one eye on my market screens. Another eye, of course, and my headlines coming through. As you can see, Pangong Shan is beginning the briefing taking place in Beijing for what to expect. And by the way, if we do get any headlines coming through, we will get to you as soon as possible. You had the PBOC governor there, plus

other Chinese financial regulators beginning the briefing over in Beijing. Let's bring in our team Stephen Engle, our chief north asia correspondent joining us from Shanghai. And here on set with us is HSBC Global Research, Greater China chief economist Jing Leo to talk us through here. Steve, I'll start with you. You're there in Shanghai. Expectations are high ahead of this, ahead of this briefing as this briefing gets underway, What's being talked about, what could be announced? Well, it looks like some monetary support. Obviously, financial officials there, the housing officials are not there. So that kind of

waters down expectations that there could be some big bang move for property. There could be. There's a little bit of chatter that There could be some brakes on existing mortgages. But again, with the top housing officials not on the podium there, that would probably less than that probability like they were back in May when they announced some initiatives to give some breaks in the property sector. So it looks like, yeah, like in January of this year, the last time they cut the triple-A requirement, the amount of reserves that are required to be held at banks,

they cut that in January. Pangong Chang had a sort of a surprise, of course, press conference back then when they were trying to stem the rout in the stock market. Some some $6 trillion was wiped out earlier this year. So they're trying to stem the the bad news as well here. So just look on the on the podium. You have Pangong Zheng. He's talking right now. You have Lee, you heard the minister of National Financial Regulatory Administration and also watching the chairman of the CCRC. So you're already starting to see obviously overnight you saw the

Golden Dragon index up. It's up five and a half percent month to date. You could see a little bit of, of course, wind under the under the wings of Chinese stocks. But again, if they underwhelm again, we'll see. Giglio what could overwhelm what what could satisfy what you're hoping for? Well, I think today probably we're going to hear 50 basis points to triple our court. This is more or less expected by the market because the liquidity is quite tight right now. And I think it's also possible they're going to announce that there's this Policy which

basically says for existing loans to developers, they could extend the loan for one extra year. But when they said the policy in July last year, the you know, the maturity date of such policies end of this year. So. Even the housing market is still under pressure. I think it's likely they're going to extend this further. What about around reported the lowering for existing mortgages, for example? Is that something we should expect? I personally think they probably need to assess what exactly they want to achieve. Hold on a second. We're hearing some lines from the governor

right now. They are going to cut that triple R and the policy rate will lower the mortgage rate for existing mortgage rates as well. So what the market has been wanting. Let's take a listen right now from the governor himself of the stock market. First. We will cut the R and policy rate in the near future. We will cut r a by 0.5 percentage points to provide long term liquidity of around 1 trillion RB who enter the financial market. We will, based on market liquidity. Consider the possibility of bringing down further bringing down. They are

from around 0.2520.5 percentage points. Yes, there's. So this is the policy I would like to announce today. We will also cut central bank policy rate. The seven day repo rate. This is what we mean by the central government. Central bank policy rate will bring it Down by 0.2 percentage points from the current 1.7% to 1.5%. At the same time we will guide. To the LPR and a deposit rate downward in order to. Ensure the stability of net interest margin. Second, we will cut the outstanding mortgage loan interest rate and unify the minimum down payment ratio.

We will guide commercial banks to bring down the outstanding mortgage loans to somewhere around the mortgage rate for new home purchases. It is expected to drop by around 0.5 percentage points. We will unify the minimum down payment ratio for the first time home purchasers and those who buy second homes. The second home purchases. Minimum down payment ratio will be brought down from 25% to 15%. With regard to the 300 billion Rand Brand the previous year launched in May for affordable housing lending. The funding support from the central bank will be further increased from 60% to

100% in order to incentivise the banks and other entities for a to acquire the projects. We will further extend the two policy documents which should have been inspired by the end of this year to the end of 2026, which concerns the commercial property loans and the 16 point measure in the financial sector. This is something we would do with the National Financial Regulatory Administration. Third, we will establish new monetary policy tools to support the stability and development of the stock market. We will establish swap facilities for securities funds, an insurance companies. We will support eligible

companies in Securities funds and insurance companies through pledged assets to obtain liquidity support from the central bank. This will increase the access of funding for these companies and their ability to increase holdings of shares. We will also set up a special re lending program for increasing the holding of shares. We will. To guide the banks to provide loans for listed companies and its major shareholders in order to support the offers to four share buybacks and increasing their holdings. We will. Release the policy documents on the PUC website in the near future. So this will be

my opening remarks together with my two counterparts. I will take your questions. Thank you. Thank you, Governor Penn. I now give the floor to Minister Lee. Thank you. Good morning, friends from the media. It is my pleasure to meet with your first on behalf. There you have it. The unleashing of stimulus there from the PBOC governor shown himself here, sort of echoing what we saw back in January here. And this is basically what we heard. So a triple hour cut by a half a percentage point soon, as he said here, a 20 basis point cut

to that seven day rate cut to one and a half percent. And outstanding mortgage rates also cut at a line. Now similar to what we're seeing when it comes to the mortgage rates of new homes. That is the summary what we get so far. Markets are certainly reacting. We talk about China. Futures are rallying hard right now. We're seeing a spike up in China and Those China ten year yield now at 2%, which is a new record low. Markets are reacting, Jane. Lou, your reaction so far. So I think this is basically to ensure this

year China can deliver around 5% growth target with stronger support. Now, I think we're going to see the basically some kind of a lifting effect. And also, I think he also says it's possible the PBOC can cut further 25 to 50 basis point of trip are actually we forecast another 50 basis point cut in the next year. I think what's also important here is he announced that they are going to extend the policy until 2026, which basically allow the banks to extend the loans to developers. Given that the housing market is still under pressure. I

think this is very important. Steve, let me bring you in. And, Steve, what stood out to you? Well, again, it begs the question, is this enough, given the stresses in the economy right now and just three months left and change before the end of the year, and of course, to reach that target of growth of about 5%. And again, you know, there's been about $18 trillion worth of household wealth wiped out by this property crisis. People are not necessarily incentivized to buy. Will this be enough to do that? That would be my big question. And

maybe you can address those concerns. Well, I think to deliver this year's growth target may be not that hard, given today's policy announcement. And don't forget, we still could have a further fiscal stimulus today. There's no probably no point of announcing that yet, because we still have more than 1 trillion quota left to be basically used up this year. And there's still possibility if needed. The Ministry of Finance can issue more Treasury bonds, and I personally think they will likely to use ultra long term special Treasury because that one does not change the official deficit.

And also at the beginning of the year, they already leave room for a more operational of that. The composition of the officials on on stage right now. And again, this is we have to emphasize this is quite rare that it is actually a live briefing that they're taking questions. You have the BBC governor on the screens. Here is the banking regulatory looms that we were talking earlier on to see us are see watching. What do you what do you think he could add to? Because I believe he's yet to speak. Right. So just now, actually,

Governor Paulsen said the U.S. will directly provide funding to brokerage firms and other kind of fund management companies. This is quite an unusual movement, which means the PBOC actually can provide the low cost funding to those players in the stock market. And probably watching will announce more details in terms of how they want to make it work. What do you make of the communication, the timing of this? We talk about this is live. We rarely hear them live speaking to reporters and we're broadcasting at 9 a.m. Beijing, the transparency factor. How big of a factor

is that for you now? I think so. This is one of the rare move probably going forward. We're going to see more of such kind of press conference because there's quite some emphasis on transparent policymaking, on improving the communication with the market. So I think the more the better. Yeah. In fact, this line just crossing right now and we were alluding to this, the Pentagon announced that China will be creating a new monetary policy tool for the equity market. Among the many things, of course, that have been announced here so far, if anything, sent out

to you still here? No, I'm just we're looking at right now. So it looks like they're talking about more tools for the equity market. Right. Certainly, there needs to be some sort of that sort of support. We have been talking about how state backed funds are. Are trying to at least support this Market right now. But we're still talking about one of the worst markets this year, which is China. And the foreign investors are still not convinced of this sort of recovery story, which has basically hit the skids of late. So we're watching very closely

what goes on here. But, yes, I think today is a quite a telling signal here that there is urgency. There's urgency to respond finally here after what we've been saying. And I just recall that to back in the 20 1516 when there was just a massive market correction in China, actually, Pelosi also essentially wrote a blank check saying that they will support whatever needed to stabilize the markets. So this is to some extent mirroring that movement, but this is a long lasting new monetary policy. All right, Steve, let me bring you back in here. The

fact that we're getting something akin to almost you know, it saved the feet of the Fed was a topic of the markets last week. And if the Fed went 50 or even bigger than 52 markets, we would be worried. You know, was there something the Fed knew that the market did in this case? Would you say this is a positive move from from Chinese economic officials coming out with something larger than what we are expecting? We were expecting. Yeah, absolutely. And again, on Evans point, I think the transparency is very important as well. They need

to do this more often, if you will. You know, they don't have necessarily an FOMC meeting where, you know, the speculation then can be either, you know, quashed and dealt with directly. We we get statements and broad brush strokes from the Chinese government officials. Look what happened since May when we got those housing announcements. The markets were up. I mean, the CSI 300 was up eight, you know, year to date high in what, May 20th. But then it just started petering out because the details were not coming out. This is an opportunity for these three

officials in watching is speaking now the CCRC had to kind of outline their policy stance and plans, at least for the rest of this year. And perhaps this could be a more regular occurrence to give a little bit more transparency to policy moves, which obviously move the markets. Yeah, Steve, as you mentioned, this is rare. Let's get it straight, of course, and listen in to watching the CAC chairman Speaking in Beijing right now. In 2023, listed companies paid a total of 2.2 trillion R&D grant of dividends, a historic high. We are also strengthening regulation oversight

over a computer driven program trading. We suspend real lending. We are also deepening reform on the mutual fund fee rates. To encourage relevant institutions to prioritize their original functions. Third, the market functions is being let in, is being leveraged. We have overcome difficulties to ensure the tempo of IPO and refinancing. We are also. Increasing the effectiveness and efficiency of managing companies following overseas listing. We are stabilising the functions of the bond market as futures markets in the first eight month the ABM. I saw a total of ¥8.9 trillion of all Sorts of bonds. Fourth. We

are deepening reform with determination on the fight. We focus on the five key areas. We have released and implemented the 16 measures to support the target companies through the capital market, as well as the eight measures regarding the stock market. We are also giving a more important role to M&A and other restructurings. And since the since May this year we have disclosed around 50 major restructuring cases. The third Plenum of the 20th CPC Central Committee also made important strategic planning for deepening the capital market reform. The CCRC will continue to strengthen regulation oversight to facilitate

development stability. We will shore up the capital market function by Enhancing their role for investment and financing. The first is that we will highlight the internal stability of the capital market. We will enhance the equality and value for investment of listed companies to serve to better serve investors. We will build a broad, a policy framework which enables long term money for long term financing investment. We will also. Further improve our policy toolkit. And guard against risks. Second degree will. Serve better, serve the real economy, and advance high quality development with a particular focus on key

areas such as new, qualitative, productive forces. We will make use of stocks, bonds and futures, among other capital market tools, to invigorate the restructurings and M&A market. We will roll out and release relevant measures in the near term. We will also work with other sites to ensure that PVC firms perform smoothly so that they can raise funds, invest, manage and access properly. Third, we will protect the legitimate rights and interests of small and medium sized investors. We will crack down on financial fraud and other illegal activities. We will also put emphasis on representative action and

advance indemnity so that we can demonstrate our determined efforts. Thank you very much. Thank you. Now the floor is open. Please identify your media affiliation before raising your question. Live press briefing out of the top. Chinese financial officials in Beijing Are taking questions They have just announced, in case you missed it. Multiple rate cuts, a reduction of the triple R of banks here by 0.5%, a reduction also in the borrowing costs as far as existing mortgages are concerned. Also, a new tool, monetary policy tool as it pertains to the equity market markets and listening. 7

minutes to the opening bell. We're getting a gap high across the benchmarks here in Hong Kong, 2.4%. Virtually every single stock in the Hang Seng China index is set to open higher this Tuesday. On the back of all these announcements so far. Yeah, if you're going to live, go, you can read the commentary and it's from our china team echo govt. Both are saying wow, we can't believe this is happening in front of us here right now. Who else is in front of us? Cameras Systems Head of Asia Multiasset adversary joins us now to walk

us through. It seems like the market was anticipating something. Do you think there's met expectations or actually, are we talking about a bazooka here? Yeah, I think based on the details that we've seen so far, it looks like a bit of an upside surprise. And certainly, you know, the signaling impact is quite important here. I guess, You know, so far a lot of investors have been a little bit disappointed about the policy announcements and the follow through that we've had over the course of the year. But certainly, I mean, you know, this looks like a

good start. I guess the details still need to go through that a little bit more. But certainly, I mean, from the way I See it, maybe the markets were set up for an upside surprise is the expectations. I guess yesterday there was some positive news, but for that were quite low coming into this. Having said that, I think you know, most of the monetary side, but I think we had more fiscal policy stimulus that will certainly be more important in really driving activity here given the low level of confidence amongst a lot of households and

also businesses in China. And obviously, you know, very high household savings rates right now. Yeah, I mean, there needs to be to your point, there needs to be a stopgap measure to address confidence among investors and obviously buys time for them to then fix the underlying issues with the economy. Do you think this goes as far as being able to at least chip away at that risk premium that's been built into what, It's almost a four year bear market now? In short, certainly. Yeah. And I mean, the signaling impact in bringing, you know, giving foreign

investors the sign that they are actually doing something and conscious of the downside risks to the economy in China and you're really willing to commit to hitting the GDP targets, I think is an important signal. But as we've seen in the past, that they do need to get the follow through into the actual economic activity. Yeah. Steve, chime in on our more takeaways. Yeah, I mean, I will definitely have to see how the foreign investors react to this. There's was some encouragement overnight obviously in some shares, but keep in mind in the second quarter, a

record amount of foreign investors money came Out of China. I was just at the International Business Leaders Advisory Council here in Shanghai a couple of days ago and Dominic Barton of Rio Tinto, the chairman, he was actually talking up quite a bit about the opportunities in the IPO market and that foreign investors potentially could be looking again. Medea had that big $4 billion obviously IPO in Hong Kong. There could be others, obviously big ones in the pipeline. We heard the CSR chairman watching talking about the IPO market. Also they're talking about measures to support mergers

and acquisitions. Deal flows we know have been very, very muted. But he did not provide much detail. So I think everybody's watching this quite closely. In fact, James Baker you know, Yvonne, You mentioned that top live blog. I use the word bazooka. He thinks this is a bazooka from these officials on stage. Yeah. He said his fingers were trembling as he was typing those headlines. I think when we were reading that we were we were all surprised. He's not alone. That says a lot coming from James Vega. Cameron, though, You know, I have to wonder,

though, given this is on the backdrop of the Fed just doing a massive rate cut, there seems to be this whole American exceptionalism theme that is fading away in some ways. Is that sort of the way to pivot now? Yeah, and I guess that's consistent with our view. I think certainly over the course of the year have had the US economy are being quite strong. And for what it's worth, we do think That the US economy will remain quite strong. We're in the soft landing camp. We don't think the US economy is heading for a

recession. Nonetheless, I think what we're seeing is that where, you know, other major economies had been a little bit softer so far year to date, I think Japan, the eurozone and so on, they should pick up, whereas the US should growth should slow to something more in the sort of 1 to 3% range, so slightly below trend, but enough to really keep things on track and obviously continue to support reasonable gains for for equities as well. Yeah. Jim deal. We still had to get this of course, out of HSBC. We know we've heard almost as

much as this group, this trio could, you know, the mandate, you know, what they're Overseeing right now. What are the next things to watch outside of these officials on stage? And also, what would. Be the indicators that you think might first start to show any reaction to what was just announced today. So I think what else to watch is basically, you know, whether China can have the CPI inflation turning positive relatively soon because there are some sectors suffering from excess capacity. The Beijing already rolled out some measures trying to facilitate consolidation. And just now, we're

watching said there will be measures to support merger and acquisition. Maybe this is consistent with an effort to reduce some of the capacity, for example, in sectors which clearly have been affected by the housing market. Probably there is some room. All right. We're getting some more lines crossed here from the governor. So further triple our cuts by year end and depends, though, on the market conditions here. But yes, they might lower that triple again by a quarter to half percentage points. They're giving pretty precise sort of numbers here, Dave. And even when it comes to

the LPR deposit rates to also go down by 0.2 to 0.25 percentage points as well, we're seeing property stocks really rally. We're up 2% now. That group is up, I think five or six straight days at this point in time. It now begs the question on the limits of monetary policy, do you think, Jim Leo, We're almost at that point where fiscal starts needs to start picking up right now. Yeah, exactly. I think the monetary policy has done a Lot according to today's announcement, and we probably would like to see the next move, in particular,

what China can do to stabilize the housing market. And I think they have tried some measures which essentially encouraging the local government of the financial institution and developer to work on the projects to ensure delivery. But to maybe the next move would be the central government directly putting money into it and to make it work. Exposure to China. What do you have now? Right now? Yeah. So we within our portfolios, we are overweight emerging market equities, but that's for a global emerging market equity standpoint. I guess China is about 25% of the MSCI Emerging Markets

Index, but that's also driven by views not just on China but about emerging markets more broadly. So certainly, you know, from China's side that, yes, growth has been a little bit disappointing. But, you know, I guess this announcement today really does highlight the commitment that authorities do have to resolving issues and then therefore, maybe the potential for surprises, things due to the upside as we've seen today. Obviously, valuations are quite attractive. And to point the comments before that, you know, a lot of international investors are underweight China as well. But more broadly outside of emerging

markets, we also like I mean, obviously there's a lot of positive talk about structural and cyclical tailwinds in India, of course, and in many other parts of emerging markets that generally the easing in monetary policy, as well as the easing of the Fed are starting last week or really, you know, are Tailwinds for emerging market equities. Steve, chime in. Yeah, I think what Jing mentioned about M&A as well as deflation, keep in mind that producer price index factory gate deflation has lasted for 23 consecutive months is probably going to be now two years come November.

That's the longest streak since 1999. And so that does play into the theme about M&A and whether this is going to be absolutely encouraged, perhaps a little bit nudged to get rid of the the excess capacity. And that to many players in places like EVs, batteries, solar is the new three, if you will, so they can take out some of the excess, not only capacity but the excess competition and return profitability to these sectors right now. So that's that's something that you ask what's next? That's a good follow through on what Kind of M&A and

consolidation we could see in the industrial space and reduce some of that excess industrial capacity. Yeah. Okay. So we're about almost 2 minutes into cash market open. And as expected, markets are reacting very positively to all these announcements coming through. Any announcements, by the way, are still trickling through. So as far as Hong Kong markets go, were up about 3% on the Hang Seng tech index. Hang Seng is better by two and a half percent. I have yet to look at market breadth so far, but I would imagine almost everything, if not everything is up

on a major benchmarks drops CSI 301% to the upside Shanghai Cop Shenzhen comp. As you can see, your ten year yield is at about 2%. And some of the well, some of the more Specific ten year bonds. And by the way, we have something like 360 billion as far as jobs that are hitting the markets today out of the Ministry of Finance. So keep an eye on how these yields at these levels affect demand for these auctions coming up today, which amounts to about 2%. Flip the boards, please have a look at where we are

in Hong Kong. And the 2.4% gains were. Seen as far as that is concerned. On your screens, Tencent is up 1.6%. Hang Seng Tech should be there we go, about 3% to the upside here. Very quickly, flip the boards, please. I mean, we can get to some of the idiosyncratic stories in a moment here, but we'll talk about this later on. Albion was actually up substantially as much as triple digits, 125%. Yeah, up further 11% today. Obviously, we're getting a bid coming through across the property sector on the back of two things that were announced.

Right. A lowering of existing mortgage rates. And on top of that, direct financing or financing, at least from the banking sector to the property developers and some of the brokerages, This was really, again, came somewhat out of the blue, the announcements here around this, these new tools here. Yeah. To to boost the equity market. It was the equity market though somewhat indirectly to boost equity markets. Yeah. So certainly that's some surprise. As we talked about here. You can take a look at what we're also watching out for. We go back to the and many so

that that stock. Yes, plummeting just now. It's getting a double downgrade on the 80 hours for Bank of America overnight. They're taking a big stake into Yonghui supermarket stores at which the market is interpreting that as a bad idea, it seems like right now. But yeah, but you saw the ADR plummet. We're falling back through here today your way. Shares, though, for example, are all going the opposite direction, actually doing quite well. Anyways, that's beyond the point of what the big story is here today, which is basically this sort of surprise that we got from

these markets. And certainly when we get to this discussion here, we're hearing a little bit more. So Penguin on talking about what impact this could have on the banks. So, yes, we are talking about more room for policy rate cuts across the board. But what impact have on the lenders net interest margins, they say to remain basically stable in light of all of this as well? Maybe I can ask that question to Jake. Should we be worried about the banks? Well, I think, you know, it's probably not a secret. Some of the state owned banks

sometimes will need to support certain policy agenda, such as the local government, debt restructuring, etc.. So for a while, the banking industry argue that they need to maintain certain level of net interest margin. And clearly Pangan again today said they will guide down the deposit rate as well, such that so they can keep the net interest margin relatively stable for the banks. The the lingering question is whether what has been announced and what is coming and what has already been announced is enough to nudge China away From the direction Japan headed in 30 years ago.

Do you think this prevents China from sleepwalking into somewhat of this demographic deflation challenge, or do you need to see more? And I'll get your thoughts in a moment, because I know you think Japan is actually turning the corner as far as that's concerned. Go ahead. I think we need more. So these aggregate policies on monetary fiscal are more in the cyclical nature, trying to boost growth for the near term. For the longer term, if we need China to switch on to a more sustainable growth path, we need those structural reform. And actually the third

plan, the resolution include a lot of major reform agenda ahead, which could actually take China into a healthy growth path. There we go. CAMERON And hopefully we don't get there. As far as China goes, we don't want to wait. If it does, who don't want to be 30 years until we get there? What's change in Japan and what was the catalyst? Yeah, So I mean, obviously Japan did take a long time to get out of this sort of deflationary period. But I think the things that really kick started it were around 2022. Obviously at that

point in time you had the Russia Ukraine conflict kicking off. That led to a surge in commodity prices and at the same time really a tumbling of the yen. And what changed there was, I guess, you know, it did lead to corporates passing on the costs that they're facing onto their end consumers and ultimately really kickstarting that inflationary process in the economy. If you recall that for much of the period since the bubble burst right through into into the 20 early 2020 or so, that whenever there was an increase in companies cost basis, they typically

absorb that into their margins. And then so by finally, you know, passing that on to the consumer and then a lot of these companies sort of noticed that it didn't really have much of an impact on their bottom lines in terms of negative competition or that, you know, basically a lot of their competitors did the same thing and companies realized that they could then go through subsequent price increases. And then what really got that moving again was from 2023 with the annual spring wage negotiations, we saw very strong numbers this year was that companies were

now showing that they're actually going to increase wages that Their employees are getting after being more or less stagnant for much of the past 20 years. And so that's really kicked off what the BOJ Governor Awada is talking about is this sort of a virtuous cycle between prices and wages, which has become. Quite sustainable and therefore means that, you know, the bank negative has 2% inflation target is achievable on an ongoing basis going forward. All right. I just want to bring it back to China a little bit. My final thoughts here. Obviously, now that they've

opened up the toolbox and have unleashed some of these tools, we have to see how this plays out and whether the confidence is still there. I just want to read one comment from Raymond Yong. He's the chief economist over at ANZ Bank. He says this stimulus is too far from being a bazooka. So he's maybe a little bit pouring a little bit of cold water on on what's been, you know, fairly well received. Obviously, off the bat, if the mortgage rate is down by 50 basis points, he says households will save ¥190 billion, but they

would turn into consumption of only 66 and a half billion yuan. The seven day reverse repo rate cut also implies a parallel move by the of the MLF tomorrow. The triple R cut is a complementary move to lower banks cost of funding. We are not sure how much the mortgage rate cut will induce a property recovery. So maybe just the beginning of more measures as these officials here on the stage are offering up a little bit of transparency. But now its implementation is the key. Yep. Lots to watch out for still. Fantastic. For 40 minutes

into the show, we haven't taken a break. We'll take a break very, very shortly. Markets are bid substantially. Thank you so much. Stephen Engle in Shanghai for us and chief north asia correspondent here on set in Hong Kong, Jim Leo, greater china chief economist at HSBC Global Research and Karen Systems, head of Multiasset Asia at Mercer. Plenty more ahead here on the China show. Good morning. We will cut required reserve ratio and policy rate and guide the market benchmark rate downward. Second, we will lower the mortgage rate for existing housing loans and unify the minimum

down payment ratio. Third, we will establish new monetary policy tools to support the stability And development of the stock market. In the near future, we will cut our by 0.5 percentage points to provide long term liquidity of around 1 trillion R&D yuan to the financial market. We will, based on market liquidity. Consider the possibility of bringing down further bringing down. They are. From around 0.2520.5 percentage points. And that's, of course, just the place. This hour, the PBOC governor, the Pangong Shan, announcing a series of steps to boost and aid the economic recovery markets. As you

can see, 12 minutes into the session here are catching a very strong bid, particularly when you look at developers and also some of the brokerages given some targeted target announcements along those lines as well. But it really goes to show the at the end of the day, this has to affect consumption and consumer spending. It should. It's interesting. I mean, we didn't get anything more in terms of the fiscal side of things. When you talk about housing policies and you didn't get the Ministry of Finance there, that is what was probably lacking in this press

briefing. But the easing of lending conditions, I'm guessing, is going to help the consumer in some way as well, which basically has been in the doldrums as well. Let's bring in Michelle Chan, co-head of Asia consumer research at Goldman Sachs. Was there anything that you heard just now that might change your view on how this whole consumption story evolves? Yeah. So on the positive side, we definitely need policy support. So from a liquidity perspective, from the fiscal policy perspective, definitely when the if patient is so Low, this could boost the sentiment of it. However, we

definitely need to see more. And on the positive side, if we look at past few weeks trading for some sectors like home durables and also like autos, given the trade policies that started from around August, it actually help a little bit. So that's definitely following a very easy base perspective. This is positive. But having say that, purely looking at the fundamentals, we just wrap up the second quarter result and there is initial comment in July organizing our conference two weeks ago. Consumer companies basically talk about pretty challenging environment, especially around June, July, August. So aggregate

data perspective, second quarter, the report companies, the companies in our coverage reporting revenue only grow 5% versus 14% growth In the first quarter. So looking I had second half basis easier. Yeah, but definitely confidence level I think is still quite low at this stage. Fortunately, the base is easier as a starting point. Right. Talk to us about and you guys cover many subsectors and within the subsectors there are idiosyncratic stories as well. What are the subsectors you're most bullish on at this point? Yeah, great point. I think firstly, to talk about these easy base, why

people get a bit frustrated. In the recent announcement, our result is in June, July sun sector already entered the low base period like be or consumption but you actually miss on the low base. Yeah so that's why there is actually increasing concern about when we enter That easy basically fourth quarter where the company can really deliver this rebound another rebound. But you are right that we are we don't want to be that over that negative there. There is still some idiosyncratic stories we see a diverge trends even within the actors. Yeah. So the highlights, I

think one is travel is still more resilient. So looking at 5% consumption growth, travel is still growing at seven 8%, verses growth consumption two or 3%. And secondly, some experience related consumption as part of the also related to travel. So like outdoor spending, auto apparel, even super expensive selective brands is still doing really well, 23% growth. And in Staples beverage consumption is actually pretty good. This probably also related to you are When you travel, you actually counsel more of average duty on travel. But also I think we also see some strong local brands doing really

well in cosmetics. In cosmetics base you hear like ASEAN, although L'Oreal Shiseido, they also come in pretty negatively in China. Yeah, but you can see pro giant, they are still performing very decent numbers and even guiding off this consumer trade in policy. And people say that this is something that could actually help. How much do subsidies help and really helping to recover from the sector and what sectors actually benefit the most from this policy? Yeah. So for the most recent study of Old Hall, our team was visiting some things rebroadcast in Xinjiang, Guangdong a few

days ago and they said that for some mass market brands they Have ten 20% incremental consumption and for home appliance. So if our why goes our air conditioned air conditioner, they are seeing a more impact. So if we look at purely offline day, it has back in July, August with negative, but in late August, actually the impact the whole August number tongue into our teens level with girls. So we do see some impact. But of course you can always argue that where whether customers stuff at events they have the energy for next year easier or

it probably squeeze out ardour consumption. But I think ultimately if there is. Incrementally getting better. I think that's still a good thing. You guys write a whole piece here about Deconsolidation. What does that mean? Yeah. So this is actually a very good, Interesting topic. If you recall, in the past few years before, call the two important drivers of all kind of consumption. One was our premiumization. One was actually consolidation. Big companies, they are gaining shares of national wide because they have resources to to to expand. But in the past few quarters, we actually see some

some reverse of these trend. So, for example, if you look at restaurants, the the above designated sized restaurant companies, their revenue growth is below the average. And also in sports, where we are seeing that the big brands like Nike, Adidas, they underperform some niche brands like Arc'teryx designed and in cosmetics, MNC brands like L'Oreal, if you all that are huge, they used to dominate the growth rate, much smaller. So the thing is, That's why we construct a framework to to evaluate the trends or we think there is actually a few drivers to impact this consolidation

trend, including like channel disruption and deflation and also the initial lower initial input calls and also these margin and specifically on this deflation. One thing I think there was a stereotype that big companies, they should have better cost control. But the thing we observe recently is in some categories like restaurants, even like dairy. Sometimes the low are the smaller players when there was deflation. They actually have a much lower cost to compete. So that's why big players, they didn't really benefit too much in the past few months down cycles. Yeah, you have a very complicated

matrix. Are exhibit one, page three of the many Reports. Thank you so much, Michelle Cheng. We could be here for a long time to visit us again. Michelle Chang, their co-head of Asia consumer research at Goldman Sachs. Right. Let's stay with markets right now. We're looking at markets just coming off highs a little bit here on the Hang Seng index and the CSI 300. Let's bring in our asia stocks reporter gina youth to talk us through, of course, some of the trends we're seeing as far as Etsuko. But before that, though, if you could just

have a look at how surprising do you think these market moves are, given what we heard this hour from from monetary officials? Yeah, I think like since yesterday, like market like there were so many market chatter is about all the cards you know, our cards and I think many of those are Kind of expected. But then in terms of, you know, the you know, the PBOC is going to allow those brokers, you know, insurance companies to tap the PBOC funding and tend to buy stocks or conduct buybacks. I think those policies are really abso surprises

for the market. So right now, so we're seeing like property brokers there, they're doing quite well. And you know, has said CSI, there are all of so and then people start to kind of talk about, you know, how much act your money is going to be brought to the to the equity market because of this new move. And then I think these are the the things to watch out for and then for the cards people starts to talk about, you know, we are going to have more through the remaining of this year, you know, every

50 bips our records, it's going to bring 1 trillion to the market. Oh, sorry. It's to the to the money markets. Those factors are actually very needed are a very timely help for for the market which has been stuck around the low level for for for for quite a few months. Yeah. I mean you talk about this relentless slump that we've seen in Chinese equities. There's one corner of the market, though, that you've been tracking has been doing quite well. Is this a surge in these ETFs? What are you seeing? Yes, I think part of

the driver is, of course, the national team, as we have talked about, like they're they're having the major one of the major buyers of those ETFs in the market. I think the other more longer term shift, a more important driver is actually the changing the behavior of The retail investors. China is very different because retail investors account for more than 80% of the market turnover. So I think their mindset actually change a lot because after after seeing all the stuff on managers, they lost so much money over the past 2 to 3 years. So more

like gradually the dollar shift to their words, the passive investments. So nowadays we are seeing ETF actually accounts for almost half of China's total a trillion market cap and U.S. actually has like about 60%. So if you compare the gap is not actually not really far away from from the U.S. level which is a very mature market. So and and you know, with like with sluggish market performers and with the pledged for the. Fine by the national team. We're going to see this ratio to keep keep rising Judy. Thank you, Judy, you there? Asian stocks

reporter watching all things China here this morning. Of course, we get you a market check coming through here. As Dave mentioned, we already are seeing or paring off some of the gains from the initial press briefing and this sort. So is this the real deal is what the question is here today? Eric Zhou from our Bloomberg Economics says this is a day to remember when it comes to China monetary policy. This is Bloomberg. All right, here's the paradox. Or is it an automatic PR? I forgot what it is. And it is. Of course, property stops

off the ground, as you can see, flying in some cases. As to the BBC announcing a series of measures to aid the housing sector, although a reminder from Governor Pond Don't go to the bank this afternoon to check on mortgage rates, it will take time for these things to seep through. Plenty more ahead. Welcome back to the China show. Here's a look at the HSR just a half hour into the session. That press briefing still underway in Beijing. More than an hour, an hour closer to hitting one hour mark there. So certainly they're taking all

these questions from reporters. It is live. And this is something that is Bloomberg economics. Eric Joo says a day to remember when it comes to China monetary policy here. But we rarely see all three of these regulators and, of course, pollution. The governor here unleashing the stimulus blitz, everything from triple our cuts, mortgage rates and the like. Dave. Yeah, well, we rarely see Eric Zhou impress. So the fact that he's almost as major on the Fed and James McArthur colleague as well for Bloomberg clients you can check out our ongoing blog until we go which

means that this ongoing briefing, it is rare in terms of timing. It's rare as far as who is involved, and it's rare as far as what was announced. Markets are big. We're up 2%, we're coming up high. So a little bit. I should also note C is our 300 to 500, C is up 1000 and small caps all the way up to the 2000 benchmark. Now looking like this 30 minutes into the session here, we're up now half of 1%, give or take. We were up as much as 1% in some cases. Property stocks in

Focus were up five or six straight days on. There's a lot of speculation in the markets yesterday after it was Announced. Well, I will after today's briefing was announced, what was taking place. I think we're up still on all, if not most, of these property related stocks on your index. I think we have them coming up on your screens. Can we get that up, please? If we can. The Bloomberg Property Gauge movie go. Do we have it? Okay. Well, if we don't, let's get ahead and have a look at where we are as far as

the regional benchmark is concerned. Oh, there we go. So we should be looking at most stocks on the way up, mostly on green. The benchmark is off highs as well. As far as Asia goes with the page, please, I'll make it very, very simple here. We're now trading because of the rally At Hong Kong. We're not trading at the highest level on the regional benchmark. We touched it earlier on. I believe we're still at about this levels highest level here since 2022. Whether we close Tuesday at that level remains to be seen. But certainly the

U.S. and other officials there have given us a lot to talk about this morning. Yeah, and let's get a little more on what to be take. Is that right? You know, this data, remember, according to Eric Zhou, what he said was there was, you know, if you add everything, the sum of the parts together, that that's what makes this significant, right? This will give the much needed boost to sentiment. Their baseline forecast was 4.7% growth for this year. This powerful package of monetary stimulus, he thinks, suggests growth could approach that 5% target. Those are similar

words that we heard from Jack Lew from HSBC to just a few minutes ago. Yeah, very impressed by the we were expecting I think the broad expectation was we would get one or two big announcements, a triple R cut plus something else. But we did get was those and then other things coming through as well. And I think if you aggregate everything so far, what we've heard in the indication is the current consensus of 4.7%. There is upside risk to these forecasts given what was announced. Now, I guess a bit of context too, for and

we'll get more in a moment here from our team for our viewers here. So we're getting well, you have three top officials in Beijing right now. You had the central bank governor. You're the banking regulator head, and you also have the securities head as well. So effectively, what they can announce was announced today. Those that, of course, are under their mandate. Yeah. Let's bring in our chief medical correspondent, David Angel in Shanghai. Also joining us now is how Hong Grow investment partner and chief economist as well. Steve, I'll start with you. Obviously, this is what

a day I think for some economists, this is a bit of a surprise of what we got. Yeah, I think we got probably more than what we were expecting, but our expectations have been fairly low because they've been doing such Piecemeal approach to policy moves. You know, is it a bazooka or not? I don't know. You can have the biggest bazooka on the battlefield, but it still has to hit the target. Right. And you can add all that firepower. But again, it has to hit the mark. And again, so far, if you look back in

May, when they had that so-called property rescue package that was announced, it didn't necessarily hit the mark. It did not put a floor on the property market. And the stock market reacted as well. The CSI 300 is down 13% since May 20th, since we had all that hoopla around property. And I think that is still a crumbling pillar of the Chinese economy that needs policy, further policy support and sentiment boost because of those Households in China who have lost about $18 trillion in household wealth through these years long crisis in property. I don't mean to

be the wet blanket here, but again, we're going to have to see whether Pangong Chang and other officials come through on their pledge to do more stimulus, more easing on data dependent needs. Right. So we have three more months left in this year to kind of stimulate a way into that growth target of around 5%. They can probably hit that on the margin. But again, is it going to restore the confidence? So some positive, better than expected moves today. Now, I throw it forward to see the implementation. How long? I'll bring you in your initial

prognosis, sir. Yeah, well, I think, you know, some of the policy announcement today is above expectation, even though I think many people were expecting a cut. But I think the the cut was before and than before the expectations in terms of timing. Right. So if they actually bring it forward. And also, you know, there's another related announcement about letting the financial companies to borrow money from the central bank to buy stocks, even though we don't know how much liquidity there's going to be. And also, you know, how you know how many funds management companies need

to borrow the money to buy stocks buzzing from a sentiment perspective, that's going to help as well. And I think today's announcement comes at a critical juncture in the sense that, you know, the stock market last week plunged to a level not seen since February this year. If you recall. Back then, there was a concrete proviso the Chinese market was plunging very heavily. And it's, I think, one of the most oversold conditions in recent years. And I think now, you know, the market is sort of moving around that level and that's sort of giving you

a T ankle level or a kind of gazebo. Howell I'm just wondering the fact that there wasn't anyone from the Ministry of Finance. We didn't get anything in terms of fiscal policies here. The fact that we're still getting that mortgage rate cut. Are we approaching that sort of limit of how far monetary policy can go in supporting the housing market now? Yeah, I think the people are cut is completely within the jurisdiction of the you know, the U.S. Doesn't have to consult anyone, you know, for such a cut. I think the physical policy is indeed,

you're right, you know, much slower than expected. I think for this year. The the the bond issuance counter is still quite a bit of left still being unused. I think it is in the in the magnitude of ¥3 trillion or above. So I think, you know, that is sort of holding the physical stimulus back. And also at the same time, there was a if you remember, there was a TV, it was lending more money for the ministry to buy up excessive inventory in the property market. But for some reason, you know, this ¥300 billion isn't

fully utilized just yet. And also, you know that that's a room for more sort of the institution as well. So I would say that, you know, the Physical zone can do substantially more. I think monetary side is a good sign that the populace is is cutting aggressively. There was also another measure announced today. I'm not sure if you're able to see that. How long Let me just read that for our viewers as well, just in case. So the central bank has now set up a swap facility that allows brokers to tap the central bank for

funds to buy to buy stocks. And what do you make of that move? What do you think it is? And I know we've asked this question before and so far the market's gotten this went wrong. Does this finally put a floor underneath these equity markets? How long? Well, I think, you know, the the level that we discussed just now, around 2600 Is a key technical level. Right. So with this type of policy in place, it sounds to help out, but bit in the same time, you know, the ease and damage some of the details regarding

the swap tool from the CP, you'll see I think it'll do in the 2015 stock market crash. They use a similar to they set up a company called Yes. So to lend money out to the to the brokers in environment and companies to buy stocks, it was back down. I think you know this could be a similar facility aiming to support the market I think you know because right now the market sentiment is very weak and I think the housing issue is far from being resolved, though, remains to be seen. You know, how much extra

liquidity can come out of this facility, how long? There was a lot of, I guess, forward guidance from from the governor of just how far they can go, a triple R cuts that there's something that goes beyond 2025. It really sort of defines what what the communication sort of strategy that Panglossian has laid out since the start of this year. What do you make of that sort of transparency? Yeah, I think he's indicating that that would be like more cuts coming towards the end of the year, which we we think is a positive development as

well, is actually giving forward guidance on where the two rate is going to go. But then at the same time, I think people are to see sort of the absolute instrument for managing into making liquidity. And I think right now the problem is that because of the property crisis still unresolved, so people's Willingness to borrow from the bank is actually quite limited. So even if you cut, people are substantially and really useful, unleash the capability of the bank, the commercial banks to to make more loans. The problem is that the loan demand is still very

weak. So I think, you know, this set up policy is good, is suitable, but I think it's going to help technically and also on sentiment. But I think in terms of, you know, reversing the housing downturn is probably not how Hong Steve up here in Shanghai, good to see you. I'd like to ask you a question whether you think this is an indication that maybe Pangong Xiang in the PBOC is kind of getting a bigger voice? I mean, we know back in January he called that special press conference as well when they first cut the

triple R, I Was there at the the National People's Congress in March where, you know, Pangong, I have to be very honest. He just sat there, kind of bored. He was reading off a script. They were all given the script. All five of the main ministers were given a script to read. But some of these policy moves haven't really moved the market. Then just a month ago or a few weeks ago, we had E Gong here in Shanghai speak off the cuff. Maybe it was off the cuff, but very deliberately talking about the need. To

combat deflation. Very rare. Do you think these policymakers are now you know, as as policy hasn't really moved the dial yet. They're getting permission, if you will, to speak more forcefully. Yeah, there are interesting developments in the In the bureaucracy. So, obviously, you know, we're seeing some of a relaxation of, you know, how are we going to stick to the growth target this year. So we're saying that we know we're going to try our best to achieve that. And then also, you know, as you mentioned, you know, you guys mentioned the word deflation, which is

quite rare. It has to be has been a censored word on the Internet. So it's rare for officials to speak out. And also, if you look at the economists so-called rise, are there more and more economists coming out and saying, you know, something has to be done? And there's a growing cause for policy stimulus. I think many of these developments are helpful, and I think it helps to bring forward these kind of many other policies, initiatives. As we said just now. Right now, you know, because the long demand is very weak. So even if you

relaxed the monetary policy, the effect is going to be limited. And probably this is more on the stock market, on the sentiment rather than on the economic fundamentals. Physically, we have to do more in terms of know government officials. I think, you know, it's good that they come out and speak out. And I think you sort of help out the discussion in the public about how the policy should move going forward. We're also hearing more from the governor right now how on that the exchange rates. So they're saying changes in global monetary policy has cut

the yuan depreciation pressure. And we talk about, you know, what does this mean for China? Some ways this the strength that we've Seen, the U.S. has pushed back against this strength of late with the fixings. But how comfortable do you think policymakers are of where the exchange rate is right now? You know, I think previously the belt shows are not comfortable with how weak the currency has been, because we currency's seen as a weakness in the country. And I think in recent weeks, the Chinese yen has appreciated substantially on 7.4 to 7.04. And I think

many people are watching that because an appreciation and also to the formation of a currency infusion expectation can bring back capital flow to the Chinese capital market, which is what we desperately need at this stage. So right now, we're trying very, very hard to attract capital to come back to this market. And, you know, as you can see, you know, Because of the capital outflow problem, it's depressing that we in the Chinese capital market and also it's decreasing the Chinese weight in many of the international benchmark indices. So right now, I think one of the

key task is to attract foreign capital to come back, I think, and appreciating would help. So I think the recent strength in the Chinese yuan may have showed up some of the confidence in the regulators, and I think they can do more if the fiscal and monetary policy are strong enough to sort of reverse the downtrend, then I wouldn't be surprised to see more appreciation in the Chinese yuan coming and that would help capital to come back this time. How long? What about what about this pushback that they've effectively stood by the side of this

bond market and said that that that's enough yields can't go lower than That? And we you know, we crashed through 2% about 30 minutes back. We're a little bit above that currently. Do you think it's a signal how long that they're also taking a step back from intervening in this bond bull market? Yeah, well, I think they should, you know, sort of step back and use a little. Because. The bond prices treated and set by the market buys. So it's very difficult for the opposition to intervene. And so, you know, here is one of the

best performing ACB as. Let's look at the Chinese market that has been under relentless pressure. And I think because of the housing crisis is still unresolved, the deflationary expectation is still in place. So it's very difficult for the long view not to for prices will continue to fall. And, you know, and also in China, I understand that, you know, in the soaring Western economics, that the shape of the Yukos has some sort of forward indication of where the economy is going by central China. You know, this thing only this week, I think people are just

buying bond, you know, for some reason they signaling. And I think unless we can sort of reverse the house and turn. I won't be surprised to see you continue to make new laws. Steve, just just have, I guess, a final thought from you, because interesting that you mentioned. I mean, you were there. You mentioned during the NPC, you were there at the Bond summit last week when the former PBOC governor came up and spoke and talked about deflation, which was a taboo term as how is pointing out On social media. Steve, I want to get

your thoughts on this briefing today. As much as it was addressing two separate maybe audiences, the local domestic economy and global investors, for example. Do you feel, Steve, this was a little bit more deliberate in speaking to global investors, given the time of day, given it was live and given how forceful some of the language was? Yeah, I think so, absolutely. I think the sentiment of foreign investors into China has been depressed. Obviously, they don't get the necessary transparency that they're accustomed to in the West from like the Fed officials and others. So I think

there was you know, there was some momentum lost definitely in the second quarter. There was a record amount of foreign money pouring out of China. They want to stem that obviously, here. And you can kind of see it at the International Business Leaders Advisory Council on Sunday. There was a smaller grouping. It was very positive in nature, obviously, but it was smaller in attendance. And that's something I've seen repeated across a number of different events, including the auto show and other events that I've covered so far this year. So I think definitely the Chinese officials

are trying to not only address the domestic confidence issues, which is vast, let's let's face it, with the property market so far down and consumption so far down, retail sales in the single digits, if at best. But the international investor is is a key one, obviously. Guys, thank you so much. Stephen Engle there, our chief North Asia correspondent in Shanghai for us in Hong Kong joining us as well, co-investment group partner and also chief economist there for their take on what was this, an breaking news in the last hour or so. Just ahead here on

the China show here, why State Street says Asia based asset managers are warming up to fixed income markets in the region. More on what they're seeing or where they seeing opportunities just ahead. This Bloomberg. Right. Welcome back to shows three B's for you. Beijing bold and bonds today with a ten year yield briefly below 2% for the first time really on record. And the Chinese ten year yield, we have something like 350 billion north of that in an auction today. So just keep an eye on that. We're obviously still coming through this Fed conversation where

you're getting more official supporting Possibly a bigger cuts, interest rate cut, another big one and of course the BOJ and what that means as far as policy goes moving forward and can they still hike as they get things back to when real rates are still horribly negative, getting back to neutral? Plus, I think we have a central bank decision today. Yeah, yeah, yeah. Don't forget about that. The whole rates though. But you know, it doesn't really change what after we saw basically the Fed open the door for a lot of the central banks to cut

but it seems like the RBA particular they're really just focused on fighting inflation and rising housing costs here right now. So expect that Aussie to be beat up according to some strategies that we've been talking to as well. Let's bring in Murray Song State Street's API fixed income ETF strategist To talk about just what we heard from this presser from China, how rare it was, you know, just given the fact that sentiment has been so weak in China, people have just been clamoring over Chinese KGB's does anything that came out of this, the announcements that

we heard spread that risk in any way? I actually think it's a continuation of sort of quite supportive short term performance for the Chinese government bonds. I mean, you've seen that on a year to date basis. They have been, you know, among the highest performing of the local currency bonds because of the more accommodative stance of the central bank. But of course, longer term, it remains to be seen if these measures, you know, will have the intended effect on the economy. So time will tell. Okay, let's figure out what fixed income Looks like these last

three months of the year. And going into next year, it seems to be that the pace of easing globally is starting to pick up. What are the what are the some of the easy opportunities that you see? Yeah, absolutely. And of course, the US Federal Reserve was one of the last of the major central banks to ease this month. And so it's not just good news for, you know, the traditional markets that we think of like the US and Europe, etc.. But also if you think closer to home, it's also a positive for Asian government

bonds as well. And the reason why I say this is because there are reasons on an absolute basis as well as a relative basis on absolute terms in terms of, you know, Asia government bonds. What you're seeing there is that the central banks have more latitude to Lower rates. Certainly if, you know, currency defense was one of those sorts, you know, keeping rates where they are. And then, you know, you can also see gains from currency. We've already seen the US dollar strength sort of come off a little bit, soften in the second half. And

if this continues, you know, that will be a continued tailwind for Asian currencies. And on a relative basis, yeah, you know, the US Treasury yield is getting much closer to the Asian yields. Yes, that's right. There's a lot of questions of which markets benefit the most from these these cuts from the Fed. You had a survey that came out way before this Fed cut, of course, last week. What is sentiment like me? How are people positioning a range of Bonds here right now and what do they prefer? Yeah, definitely. So investors are increasing their allocations

to Asia. ex-Japan bonds increase of 1% of the overall fixed income allocation. The 12 months to a survey, which was earlier this year with similar numbers of Fed cuts factored in at that point in time. And in terms of going forward, you know, their positioning is also another increase of 1% in the next 12 months. They're going into this with, you know, very open to the risks, of course, that they're taking on as well. So what they're looking for in their Asia bond exposure is diversification as well. So multiple markets, rather than being concentrated in

a single market. And what do you think the biggest drivers will be of performance moving Forward? Yeah, I think both on the bond and currency side for these Asian local currency bonds. On the bond side, you know, we do see, you know, more room for the Asian banks to actually ease and that can definitely be supportive of bond pricing. And then, of course, currency. We've already seen a very good performance sort of in the second half of some of these Asian currencies. And, you know, that is potential for continuation later on this year. Yeah. What

seems to work the most I mean, in terms of time horizons, right? If I look at duration, for example, or even just kind of what sort of part of the curve works now, Yeah, there's quite a spread, you know, in a certain. That we conducted with 600 participants, all of whom are professional investors. Their preferences are spread out, but Most interested in the 6 to 10 years sort of tenor. Okay, so slightly more duration, incrementally, almost month to month. Marie, thank you so much. It was it was great to speak with you and certainly what

timing to do. So after the Fed and well, this is going on in Beijing. Are you talking to, of course, out of State Street Global Advisors? Speaking of Beijing, we'll leave you with a live look at that briefing, which is still ongoing. We're going on 90 minutes now out of this joint briefing in Beijing. Let's listen in. Thank you for your question. The new Insurance National Ten articles released by the State Council has made a comprehensive and a systematic plan for high quality development of the insurance industry, and China's insurance sector is facing a rare

Historic opportunity. Going forward, China's insurance market will continue to expand and intensity and depth will continue to grow. Insurance funds have large scale long term. We will cut the outstanding mortgage loan interest rate and unifying the minimum down payment ratio. We will guide commercial banks to bring down the outstanding mortgage loans to somewhere around the mortgage rate for new home purchases. It is expected to drop by around 0.5 percentage point. Previously, Governor Pango was shown there announcing measures to support the property sector. So when it came to existing mortgage rates, that goes down and matches

what we've been seeing when it comes to new mortgages and also second home down payment to 15%. Let's get some instant analysis from our very own Kristie Hoang Asia real estate analysis analyst with Bloomberg Intelligence. So cutting that second home down payment to 15%. How significant is that? Yes. So another move to cut down payment ratios have happened before for first home and second home as well. And I think the harder is saying it doesn't matter how much we're making it easier for people to buy a home that won't overcome a lack of confidence. We

continue to believe that we need an improved outlook on the economy, on job security, as well as on home price upsides to convince people to be confident about placing their purchase on a home. So I think we are reducing initial deposit, but that might not be the main concern for buyers. For now, the affordable the new measures and across affordable housing. So I think it's 300 billion. It used to be partially funded by the central bank. Now they're moving to make it fully funded by the PBOC. How does that exactly work and what does that

do? Yes, So people actually used to fund 60% of the loan. Now they're funding 100% of the loan. It means that it used to be the case that banks are lending ¥100 for affordable housing program and the people also would be paying 60% or 61 of it. Now, the people also would be paying one of it, meaning that people is now taking the credit rates away from banks and shifting it entirely to the central bank. So I think then banks won't be will be Any more the roadblocks to this process. Banks are no longer concerned

about their own credit risk, so they might be more open about lending for this affordable housing program. So this could help us salary because we talked about before how the ¥300 billion fund. It used to be only 4% utilized as of engine. So hopefully this would help ramp up the process. Then I think you could see more lending being directed for this purpose. And then eventually ¥300 billion could be used up if it's only going to be a rescue fund entirely funded by the central bank. Then the problem is then, you know, is ¥300 billion

enough, hopefully in the near future that would be for the extension of the quota. And but I think in China, structural challenges remain and restoring supply Demand balance remain a medium to long term challenge. Yeah. You mentioned in your your initial reaction is that the sum of these announcements is still no cure to reverse this home sales slump right now, what could still change? I mean, Tier one cities? Could we still see them relaxing property curbs? Yeah, that's another possibility. But we called it in on the last throw of the dice. It is really the

last option in a demand side policy toolbox. And we have seen how these measures relaxing home purchase curbs, further lowering down payment ratios. They didn't work in tier two cities in shoring up their home sales. So there is a chance that they would work in two one cities that's more resilient. But Tier one city at the end of the day is just 15% of national home sales. So I think that would still going to be, you know, marginal support in the sell off, you know, a full turnaround for the housing market in China. Put that

into context for us. I think that's important. Why would this be the last roll of the dice on the demand side? Yes, because in two, two or to three cities or smaller cities in China, home purchase restrictions are fully relaxed already. So they are only remaining in place in Tier one cities. So if tier one cities are also removing, you know, you have no other options that have to stimulate demand from a policy perspective. And then also, on the other hand, you know, down payment ratios in Tier one cities, they still have room to cut,

but Otherwise orders other cities dumping more ratios are already raising to the minimum 15%, meaning that we think that is unlikely. The down payment would be lower, further to 10% or 5% because of, you know, there's also household leverage concerns from the people you see. So I think from that perspective, the room for further policy stimulus would be quite limited in shoring up demand in China. Yeah, Kristie hung there on the poverty angle here to this multifaceted story coming out of Beijing. That is breaking news story out of Bloomberg Intelligence there. In fact, just to

recap, some of the latest lines come through and we are now over 90 minutes into this into this briefing. This one is coming out of well, you're on your screen is the PBOC governor. Couple of lines coming through from the CCRC chairman saying. That they will continue to support central region to raise their holdings. We're also getting a line coming through here. I think it's it's interesting. We kind of I think we missed this. The PBOC governor said that they will continue to rectify and punish problematic acts in the bond market. Not going into details

there, but I think we could almost surmise that that would be against increased speculation in the spot market. Obviously, this, you know, what was announced opens up perhaps possibly a new new downside here, a fresh downside to bond yields onshore. We're also now getting through I think we're getting more details now on what this I believe what the swap aisle here we go. We now have the amounts involved here For that first batch of this swap program. And I imagine this has to do with the swap program between the PBOC and the brokers. If that

is the case, I'll correct myself. It's not the case 500 billion renminbi, and I think that is now going hot right now on on your Bloomberg terminals. Yep. Okay. That's going to be a big one as well. Now that we got some numbers on that swap facility here, you can get more to live. GO is still happening. Still ongoing here right now with our plenty of expert editors that are still commenting and analyzing this big, big day from the PBOC. Coming up to discuss Jp morgan's annual India Investment summit in Mumbai with their global co-head

of payments, this Is Bloomberg. All right. As Dave had mentioned here, that. Yes, so that's one. There you go there wrapping up this press conference finally. So we're talking about a little bit more than 90 minutes that they took the questions and announce a slew of policy measures. And just quite significant. There you see the reports now hovering around the three to take some photos. But, yes, the latest line, as David mentioned, was about that small facility there. So planning at least 500 billion renminbi of liquidity support to stocks. So does that revive the animal

spirits? Is certainly one thing. There are a lot of airlines that we we've already talked to and our team has talked to already say, look, initially, Yes, this could give a boost. The long lasting support, though, whether that actually does sustain is another still up in the air right now. Yeah, we need to see earnings come through. We need to see the numbers start to show the economic indicators. And again, this goes back to several rounds of almost in a similar situation. We've been here before where you're getting quite a bit of policy support, more

than expected simply to buy us time before the economy starts off again. Again, that's a conversation markets are reacting to that 90 minute briefing just ending right now. Very briefly, let's have a look at Nifty Futures right now. So we're going in. So just keep in mind. Right. So because of what's happening in China, We're now at two year highs roughly are we were depending on the benchmark at two year highs in the regional benchmark. India is at a record high. You're looking at Australia, which was at a record high. And Friday several markets in

the Asian region have started to kick into high gear. Like Indonesia, the Philippines entered a bull market yesterday. It really now takes us into this e m conversation. Yeah, HSBC just downgraded Korea right to underweight and they're pivoting more to Southeast Asia and so is Malaysia, Indonesia, Indonesia, Philippines as well. Let's let's take you to India now and of course, the Jp morgan India Investor Summit continues in Mumbai today as executives and investors discuss a key themes shaping today's landscape in India and beyond. And our next guest is one of the featured speakers. Max Mukherjee

is Global Payments co-head at Jp morgan. Also with us is our senior editor at Bloomberg Médico Joshi. Max, it's great to have you on. Thanks for joining us and hope you're having a good conference so far. First and foremost, maybe just lay out for us what is Jp morgan's current payment strategy. Good morning from Mumbai and thanks for having me. Jp morgan Payments, in a nutshell, is basically and as helping clients accept money owed money, send money, protect their money from any fraud, and also generate insights from from the money they hold to better run

their business. And we do this at a tremendous scale. We operate in about 160 countries. We process about $10 trillion a day. So we are probably one of the largest payments businesses in the world. And with that comes a an important responsibility. We focus on growth and innovation to shape the payments markets, but we also very much focus on resiliency and instability, given how many companies and franchises depend on us. Max, Good morning. This is Mallika from Bloomberg in Mumbai. Welcome to the city. And let me ask you about what you make of India's progress

when it comes to digital payments. It's an area the country has led in across the world. Which bits of this from UPI to the Reserve Bank of India? Cbdc experiment. Which bits of this look most exciting, most prompt promising to you? We are very excited about the Indian Market and also about being present here in India, because it's not only a very important market for our clients headquarter names here in India, as well as multinational companies looking to grow in India. But it's also to a good part how the future of payments globally is being

shaped here out of India. UPI is a great example of a payment scheme that the government developed here that is really becoming a trendsetter around the world. There have been almost 15 billion payments processed in a single month, I think in August, and the growth is tremendous. And we really look to be here with our clients for our clients, but also to bring those innovations out across the world. And it's really exciting to see. And UPI is a good example of an innovation that is not just the payment Rail, but it created also a whole

ecosystem of fintech companies that developed exciting solutions for commerce around the world. So this is definitely not the end of the journey yet, and we are very glad to be part of it. Max, what can you tell us about your own D.C., which is the public retail e-commerce platform or in DC product here and how it will evolve over time? Do you expect it to be a significant business venture? Boyd DC is another exciting innovation here in India that creates an open platform for commerce, and we recently announced in partnership with ASG a solution for

our clients to access this open market for commerce here in India. And we basically provide a combination of a merchant services solution to accept consumer payments, Treasury services solution that runs payouts and A seller app to make it easy, particularly for smaller merchants and also mid-sized merchants, to access the huge Indian market and sell their products on on the various e-commerce platforms that I hear and we have seen already, and really encouraging growth on the volumes on DC and look forward to the journey to continue. So it's really a great innovation and also an example

of how we team up with local companies, in this case ASG, to provide very unique solutions in the market here. Okay. I'm going to put a quick last question to you, Max, and that is how you see the global environment for cryptocurrencies move forward. India is one amongst many countries that has yet to frame regulations for crypto, in a sense, leaving it in a grey space. The US election might have the most Important bearing on the future of this space, whether it is, you know, Bitcoin style, crypto or even stablecoins from here onwards. So what

do you expect will be the outcome given depending on where the election goes? We very much focus our strategy on the distributed ledger technology and we have the JPMorgan coin and other offering as part of our Onyx product and Solutions line and those allow 24/7 US dollar clearing. It's a great value add for clients that are looking for round the clock viewing solutions and the new technology is based on distributed Ledger really has great opportunities there. We have deployed that, for example, here in India already in Gift City in the in the free trade zone

there. And there is there's tremendous client interest on this cryptocurrencies. On top of it, it remains a very Interesting and hot topic in payments. We observe the market, but our focus at the moment is on the Jp morgan coin and the mining solutions based on the distributed ledger technology. Max. Max, Let's leave it there. Max, New coach in there. A global co-head of payments at Jp morgan. And of course, the bank's big conference taking place there in India. And of course, also joining us now is senior editor Monika Joshi, also in Mumbai for us. There's

more, of course, coming up there from the investor summit taking place. And just on your screens coming through at those times is the co-head of global banking, Filippo Gori, joins us in the next hour to talk about sentiment around investing in China and how that might be changing moving forward. We have some breaking news, though, just To pivot here to Singapore. Yes, this is the long awaited corruption trial of the former transport minister of Singapore. This is issue one. He is facing a total of 35 charges related to corruption. And what we're hearing so far

in this courtroom is that the Singapore prosecution has amended some charges from the corruption, but the big one is from the ex-minister is Robert himself pleading guilty to bribery charges. So this case really has been seen as a sort of a test trial for the party that has long relied on his reputation for clean governance to win elections, US and Singapore's independence in 1965. So certainly we'll get to see and watch more details coming through on this trial play. More ahead. This is Bloomberg. Welcome back. You watching the China show? Just to recap, the ton

of breaking news that came through out of Beijing and the that rare joint briefing just ended about 15 minutes back. And this is just some of the key takeaways there. So multiple interest rates being cut. There's a swap program that the central bank is will open up with the brokers for them to buy stocks. It goes into this other headline which also just came through that China is is studying. So this is something that's still in the potential of and as they say, setting up a stock stabilization fund. And really among a series of measures

aimed at boosting the economy and boosting confidence, too. Yeah, it's interesting that the PBOC has unleashed this new tool, as they say, to support the stock market. And it's interesting, right? So what people are saying is, is this really going to help at least stabilize the market? Are we going to see something that could actually lead to some sort of recovery in equities? Some are taking it with a pinch of salt right now. We'll see. But yes, so they're basically talking about the borrowing program. Two, stock repurchases is worth ¥500 billion. That's larger than the

one to buy up unsold homes earlier in the year. Just to give you some context there. But yes, certainly it will maybe help in some ways into the sentiment, but we'll see how this all plays out. Yes. Sleep here today. Well, that's that's one central bank that did do something. So another central bank that probably won't in the next hour or so. We're talking about the RBA, but it's certainly what they say and how they guide and how they say it, which will be really key here. So the RBA will be is expected to hold

rates steady today as the housing costs, housing costs, including rent, continue to drive or keep inflation slightly above the comfortable range. Our economics report is widely panned. He's with us right now to talk us through the story. So why is the RBA expected to stay more hawkish than really a lot, if not all of their all of their developed market peers? Yes, the RBA was all a little bit different. They adopted a different strategy to what other central banks did. They were cautious on the way up. They did not raise interest rates as Much as

others did, and one of the main reasons for that was they wanted to preserve economic growth and they wanted to preserve the employment gains that we had during the pandemic. And they have been successful so far. They have been talking about walking that narrow path where the economy is growing, employment is growing and inflation is gradually coming down. So they're happy for that inflationary impulse to move slowly as long as the economy is moving in the right direction and employment growth is on. So that is one of the biggest reasons. The problem is that the

last mile of inflation is really proving persistent and we are seeing really strong services, inflationary pressures, we are seeing housing costs remaining high and those are really problematic areas for the central bank where interest rates are not really going to do a lot, you know, with services and housing Both. Yeah, So so what are the economists, what are markets really? I think if we're going to focus on quality, then in particular when it comes to the statement and the press conference that follows. The statement is likely to be similar to the August statement. The press

conference is going to provide a lot more color around what was discussed, whether the RBA discussed an interest rate hike as they did in August. Economists are saying that the case for a hike is really diminished. How can that? Is that right? So that is really a big question mark at the moment and we will get that information at the press conference and then the communication challenge as well right at that, at a time when global central banks are cutting interest Rates. We just heard about China as well. The Fed cut last week by 50

basis points in our global backdrop like that and domestic political pressure. It is really hard for the RBA to to have that continue that hawkish rhetoric. So how they do that is will also be interesting in today's press conference. There we go, spotting fantastic context there ahead of that central bank decision there in Australia. Our economics reporter there. You can also tune in to your Bloomberg, by the way, for more on this to leave you go really has a lot of your big diary entries today including this if you've missed all the massive news flow

coming out of Beijing, there's also an entry on that which is still ongoing, I believe. In any case, in 90 minutes time, we should be getting the RBA rate decision, what they do and how they say it. We'll be right back to the big story. That's our top story today, the the stimulus blitz coming through out of Beijing and as it pertains to the property market, lowering the deposit ratios for second hand homes from 25, I believe, to 15%. The PBOC also taking up all of the financing for affordable housing from 60 to up to

100%. And on top of, I think, the lowering of existing mortgage rates as well in line with what you are to pay if you were to take out a first mortgage as well. Yeah, that certainly is helping the likes of well everything will control currencies particularly up some 10%. Brokerages are definitely in focus given what we saw this new policy tool to help boost the equity market. We talk about the swap facility. The well, we got some numbers really they're talking about 300 billion just to start off with.