CNH: China Property Cooling Measures
The intent of
these cooling measures is expected to boost housing market sentiment and
housing transaction and mitigate the housing downturn in the interim while
housing supply overhang takes time to be absorbed. We do not expect to see a
material recovery in house prices amid housing supply overhang. That said this
is definitely a positive step. We are hopeful of more targeted measures as the
Chinese economy continues to fine-tune itself.
On FX, the
Renminbi could benefit. Taken together with other strategic reform plans such
as the ‘Belt and Road’ initiative; local government debt swap (aimed at
lowering cost of funding); plans to cut the number of sectors where foreign
investment was previously restricted by half (to spur FDI inflows); advancing
financial reforms (to achieve reserve currency status for Renminbi), we believe
the Renminbi will resume its appreciation gradually.
That said we are
still expecting targeted monetary easing to better align its monetary policy
with fundamentals. We believe another 50bps cut in RRR and 30bps cut in
benchmark rates to come in 2Q. 
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