China promise for even bigger easing lifts risk sentiment

The announcement here is reverberating across broader markets as Beijing promises to step up monetary policy easing even more going into next year, alongside vowing for more fiscal spending. The headline came after the close for Chinese domestic markets but there are spillover trades. The Hang Seng is now up 2% after having been down prior to that, while AUD/USD is seen up 0.4% on the day to 0.6415 now. Besides that, risk sentiment in general is also buoyed slightly with S&P 500 futures now up 0.1%.

The headline from Bloomberg outlines a “major” policy shift from China but I would hardly call it that to be honest. Sure, the wording has changed as they now embark on what is a more “moderately loose” policy stance. Previously, they adopted a more “prudent” policy stance – which has been in place since 2011.

However, I would argue the fact is the PBOC is just going to continue easing monetary policy to try and bolster domestic demand. And that is largely what is expected and a continuation of this year’s moves.

Now, Beijing is promising further fiscal steps as well. But then again, they have been continuing to promise that time and time again over the last few years. Yet, there hasn’t been anything close to being convincing.

As such, that is still where the seed of doubt lies in terms of looking to this and really calling it as the turning point for China again.

This article was written by Justin Low at www.forexlive.com.