China Stocks Fall as Better Data Dim Prospects of More Stimulus
Comment of the Day

April 15 2019

Commentary by Eoin Treacy

China Stocks Fall as Better Data Dim Prospects of More Stimulus

This article from Bloomberg News may be of interest to subscribers. Here is a section:

"The credit data lifted expectations on market liquidity and economic fundamentals," said Wang Jianhui, a Beijing-based analyst with Capital Securities Co. "It provided an excuse for investors who wanted to bottom fish stocks after last week’s correction. But it’s more likely a technical rebound as there hasn’t been any substantial change in fundamentals."

The decline in mainland shares came after some companies issued profit warnings. In Shenzhen, Jiangling Motors Corp. sank by the 10 percent daily limit after it predicted an 84 percent decline in first-quarter net income from a year earlier.

Shandong Chenming Paper Holdings Ltd. slid 8.9 percent after saying its first-quarter profit may plunge 94 percent to 96 percent.

"While the macro numbers suggest a recovering trend, things are still looking weak in the micro segments including corporate profits," said Shen Zhangyang, a Shanghai-based strategist with
Northeast Securities Co.

Eoin Treacy's view

The catch-22 facing policy makers is if they stimulate too much, they risk a bubble developing but if they don’t do enough, they risk a contraction. That is a clear reflection of the role liquidity has played in the evolution of the bull market over the last decade and how reliant on stimulus it is for continued expansion. They generally err on the side of caution so that is supportive of continued support.

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