China’s stimulus measures were ‘bigger guns but no bazooka’, says Barclays By Investing.com

Investing.com — China’s move to implement new stimulus measures helped boost investor sentiment, but more support will be needed to sustain growth, analysts at Barclays said.

Earlier this week, Beijing unveiled a series of new policies aimed at supporting China’s booming economy and battered housing sector, including a cut in interest rates and reductions in both existing mortgage costs and minimum down payment requirements for all types of housing.

The People’s Bank of China (PBOC) also announced a swap program with an initial size of 500 billion yuan, aimed at giving funds, insurers and brokers easier access to the financing needed to buy shares. The PBOC also said it would provide commercial banks with cheap loans of up to 300 billion yuan in a bid to help them finance share buybacks and buybacks by listed companies.

Meanwhile, the reserve requirement ratio, or the amount of cash banks must hold as reserves, was cut by 50 basis points, freeing up about 1 trillion yuan for fresh lending.

Following Tuesday’s announcement, global stock markets rallied as traders gauged whether the measures would be enough to revive the world’s second largest economy.

In a note to clients, Barclays analysts said the announcements “clearly surprised the markets and sent a strong signal, particularly for equities”, although they added that “more remains to be done, particularly on the fiscal front ”, to build on actions. market advances.

Analysts noted that while sweeping, the stimulus measures fell short of expectations for a massive, “bazooka-like” crowd of political support.

Among the next measures Beijing may introduce, analysts said the PBOC could further cut reserve requirement ratios by 25-50 basis points. The central bank may also consider the “second or third” round of a 500 billion yuan lending program, they added.

Analysts also predicted that the PBOC would cut its policy rate at a pace of 10 basis points per quarter between the fourth quarter and the second quarter of 2025.

Meanwhile, Beijing is expected to continue to accelerate the issuance of local government special bonds, saying this could boost infrastructure investment.