Economy in Brief

In this week’s letter, we examine the reactions of China’s equity markets following the Golden Week holidays, highlighting investors' disappointment over the latest stimulus announcements (see Chart 1). Despite this, forecasters have slightly raised their growth expectations for China (Chart 2), although pessimism lingers regarding the economy's ability to meet its 5% growth target for the year. Turning to monetary policy developments across Asia, several easing cycles have now been initiated across the region. For instance, New Zealand has begun its easing cycle with a 50 bps rate cut, driven by cooling inflation and weak domestic growth (Chart 3). In India, while the central bank kept policy rates unchanged, it made a significant move by officially shifting its stance to neutral, indicating a closer alignment with an easing approach. This comes amid a robust growth outlook, although inflation risks remain (Chart 4). In South Korea, the central bank has also commenced easing with a 25 bps cut, acknowledging cooling inflation and slower household debt growth (Chart 5), while signalling potential for further reductions ahead. Looking to the week ahead, we anticipate more rate decisions across the region, with additional easing moves seen likely (Chart 6).

Post-Golden Week China Chinese equity markets resumed trading last week after the Golden Week holidays, showing a marked repricing of market expectations (Chart 1). Initial optimism over central bank easing measures faced a reality check following government announcements. Specifically, China’s National Development and Reform Commission outlined initiatives for October, including 200 billion yuan ($28.3 billion) in advance budget spending. However, despite the significance of these measures, a larger-scale stimulus package that many had anticipated was not announced. After initial market disappointment, Financial Minister Lan held a press conference last Saturday, pledging to bolster China’s economy. However, some observers were still underwhelmed by the lack of specific numerical commitments. Looking ahead, China will release its Q3 GDP figures on Friday, which are keenly awaited as indicators of the economy's health. This will be accompanied by a range of monthly data, including industrial production, retail sales, fixed asset investment, house prices, and unemployment figures. However, insights from these figures on the impact of the recent easing measures are expected to be limited.