All articles tagged with #fiscal stimulus
Global markets are heavily influenced by politics, with Japan's stock market reaching new highs amid expectations of fiscal stimulus and delayed rate hikes, while gold and bitcoin hit record levels amid concerns over fiat currency stability and the U.S. government shutdown. European markets remain flat, with key central bank speeches and economic data on the horizon.
China plans to implement further fiscal stimulus measures, including increasing its budget deficit ratio in 2025, as discussed at the Central Economic Work Conference led by President Xi Jinping. The government also intends to deliver rate cuts and lower the reserve requirement for banks to boost the economy.
Fidelity International's George Efstathopoulos is increasing investments in Chinese stocks, particularly mid-cap shares on the mainland, anticipating that fiscal stimulus will boost the economy. After profiting from Hong Kong-listed stocks during a recent rally, he is now focusing on the CSI 500 Index, which has underperformed compared to the CSI 300 this year.
China is expected to announce a significant fiscal stimulus package following a parliamentary meeting, as authorities aim to bolster the economy and address the real estate market slump. The package may include increased government debt and spending, with a focus on managing local government debt issues. Analysts anticipate more fiscal support, especially after Donald Trump's election win, but caution that Beijing might remain conservative in its approach. The stimulus could involve raising the debt issuance limit for local governments to manage hidden debts and reduce interest payments.
China's lawmakers are meeting to approve a significant fiscal stimulus package aimed at boosting the economy, which has been struggling due to a prolonged property slump and local government debt issues. The package, expected to be the largest since the pandemic, will focus on resolving local government debt and stimulating domestic demand. Analysts suggest China needs to spend up to Rmb10tn over three years, but caution that the measures may not significantly boost demand or consumer confidence. The National People's Congress is expected to announce details of the package soon.
China's National People's Congress Standing Committee is set to meet in Beijing, where discussions may include a significant fiscal stimulus package, with potential values ranging from 2 to 10 trillion yuan. While the agenda does not explicitly mention budget plans, the committee has the authority to approve budget adjustments, including changes to fiscal deficit ratios and local government debt ceilings. Investors and economists are keenly watching for any announcements regarding the stimulus, which could impact China's economic strategy.
China's equity investors are closely watching the upcoming National People’s Congress meeting for signals on fiscal stimulus, regulatory treatment of companies, and policy priorities. Key focus areas include property relief measures, tech industry policies, state and private firms' valuations, consumer demand, and potential capital market reforms. The meeting comes as China's stock market shows signs of recovery, with the CSI 300 Index heading for a third consecutive week of gains despite recent data showing a contraction in factory activity.
Markets are showing complacency towards the risks of a potential second Donald Trump presidency, which could lead to a "duration tantrum" in the bond market due to fiscal expansion and military conflict escalation. Analysts are concerned about the impact of Trump's proposed tax cuts and tariffs on the economy, as well as the potential fiscal risks associated with the high deficit. The market's bullishness is driven by expectations of rapid interest rate cuts by the Federal Reserve, but strategists warn of a choppier period ahead for both risk assets and fixed income.
Japan's Nikkei index reached a 34-year high, while Chinese inflation data and other key economic indicators across Asia will influence market sentiment. Chinese producer price inflation is expected to continue its negative trend, indicating deflationary pressure, while trade activity is anticipated to have improved. In India, industrial production and inflation figures will be released. HSBC's fixed income team favors India for emerging market local sovereign debt in 2024, expecting increased foreign demand for Indian government bonds.
Despite a surprise pickup in exports, HSBC's Chief Asia Economist Frederic Neumann believes that China's economy still faces significant challenges and is unlikely to be supported by further fiscal stimulus. While exports rose by 0.5% in November, imports fell by 0.6%, indicating weak external demand. Neumann suggests that the positive export figure should be taken with caution, as it may be due to inventory adjustments and base effects. He highlights the need for domestic demand to drive growth but notes that there is currently no evidence of a pickup. The Chinese government has used fiscal stimulus to support the recovery, but the economic growth numbers are not dire enough to warrant additional measures.
Real disposable personal income has dropped for the third consecutive month, while spending remains strong. Personal income increased by 0.3 percent in September, but real disposable income decreased by 0.1 percent. Personal consumption expenditures increased by 0.7 percent, with goods increasing by 0.5 percent and services by 0.3 percent. The PCE price index increased by 0.4 percent, while core PCE (excluding food and energy) increased by 0.3 percent. Despite the drop in real disposable income, real personal consumption expenditures continue to rise as consumers dip into savings.
China is set to approve over 1 trillion yuan ($137 billion) in additional sovereign debt issuance to boost infrastructure spending and stimulate economic growth. The debt issuance is expected to be announced and initiated in November. Nearly half of the proceeds will be allocated to water conservancy and flood prevention projects, while the rest will be used for post-disaster reconstruction and high-standard farmland construction. China's economy grew faster than expected in the third quarter, bringing it closer to its annual growth target of around 5%. The Chinese government has been implementing various measures, including public works spending and interest rate cuts, to support the economy amid challenges such as a property crisis and debt risks.
Chinese blue chips experienced a rare rally after Beijing implemented measures to support the market, including reducing stamp duty on stock trading, slowing new offerings, and approving the launch of retail funds. This comes as China's industrial profits fell for the seventh consecutive month and troubles in the property sector persist. Meanwhile, Wall Street stock futures are slightly higher as investors react to Fed Chair Powell's acknowledgment of a stronger-than-expected economy. The onus is now on data to show a cool-down or risk another rate hike. Recent PMI data suggests a slowdown, and upcoming reports on the labor market will be closely watched.
China's economic activity data for July fell short of expectations, raising concerns about a deeper and longer-lasting slowdown in growth. Unlike previous instances, this slowdown is different as China's debt-fueled investment in infrastructure and property has peaked, and exports are slowing. The focus now is on boosting household consumption to compensate for weaknesses in other sectors. Economists suggest measures such as government-funded consumer vouchers, tax cuts, faster wage growth, and building a social safety net. Interest rate cuts alone are seen as insufficient, and there are concerns about yuan depreciation and capital outflows. The possibility of Japan-like stagnation and the stress in the property market further add to worries about China's growth prospects.
China's consumer prices have fallen for the first time in over two years, with the Consumer Price Index (CPI) declining by 0.3 percent in July. This deflation, coupled with a 14.5 percent drop in exports, reflects a darkening outlook for the Chinese economy. Lower prices typically lead to reduced consumer spending and production, potentially causing layoffs and salary cuts. Beijing has implemented various policy measures to support the economy, but the weakening domestic demand may require additional fiscal stimulus.