China Begins To Ease Financial Conditions

man turning on vintage boombox placed on red car
China Starting To Adjust Financial Policies

China has started the easing of financial policies in order to combat a slowdown in economy growth. On Monday, it cut borrowing costs of its medium-term loans. Bond yields fell as bonds became more attractive. Today, it has made more cuts to various lending rates. These moves are intended to increase borrowing by firms and stimulate the Chinese economy.

This could be the start of a period of sustained policy easing, which would stabilize market sentiment for Chinese-related stocks and make it a good entry point for beaten-down stocks. Indeed, HK property and tech stocks have soared. But no one really knows how much policy easing will occur and in what form, as China remains concerned about having too much debt.

This is not an all-clear signal to buy any Chinese-related stock, there still needs to careful select of sectors and stocks which are most likely to take advantage of the stimulus. Do take control of any greed creeping in, catching falling knives is really enticing but some knives may drop further.