China

China: Macquarie notes last wk, the Chinese equity indices were resilient amid the global selloff set off by the U.S. This could have been a result of investors expecting more stimulus or policy supports initiated by the Chinese gov. With the U.S dragging global indices lower, will China be the glimmer of hope for investors? 1) Market supported by stimulus hopes Last Wed's State Council meeting reassured the market of continued policy support for economic growth in 4Q. In the statement issued after the meeting, Premier Li urged targeted support in areas such as water conservancy, environmental protection, IT, agriculture and SMEs. While policy supports reduce tail risk, the chance for large scale stimulus such as broad reserve requirement ratio (RRR) or rate cuts is also low. 2) Progress towards capital account liberalization: As market is waiting for the launch of the Shanghai-HK Stock Connect, policymakers are preparing for the next steps of capital account liberalization. The Peoples’ Republic of China (PBoC) is reportedly studying a renminbi qualified domestic institutional investor (RQDII) scheme, which allows domestic investors to invest in RMB products traded in overseas markets. QDRI (the through-train program) will also be rolled out, which allows domestic individual investors to invest directly in overseas securities and property. Moreover, domestic companies will also be allowed to offer RMB-denominated shares in overseas market. With these measures, China's government hopes to promote RMB as an international currency. As a result, it could reduce the pressure of foreign exchange reserves accumulation for China. Growth likely rebounded modestly in Sep: Market will look out for the September or third quarter macro data to be released in the coming days. MER believes August is the trough for the third quarter, while the third quarter, is the trough for the whole year. GDP growth is likely to slow down to 7.1% year-on-year in the third quarter from 7.5% in the second quarter, then rebound to 7.3% in the fourth quarter. To be sure, investment growth is likely to moderate further in Sep due to the weak property sector. However, property sales, which is the leading indicator for the sector, seem to perform well during Golden Week, thanks to the ease of mortgage policy on 28 September.MER expects national sales (in year-on-year terms) to start improving in the fourth quarter14, while prices would bottom after the Chinese New Year next year.