Head of China Research - Forsyth Barr Asia, Forsyth Barr Asia

David Millhouse

Head of China Research - Forsyth Barr Asia

Forsyth Barr Asia

Macroeconomics

Zhuzhou CRRC Times Electric Co., Ltd. (3898 HK)

<p>The PBOC announced on Saturday that it will cut the benchmark deposit and loan interest rates by 0.25 basis point starting March 1. We have been calling for another rate cut and 3 further 50 bps cuts of the reserve requirement ratio in the first half of 2015, and our expectations had been for a March rate cut, so this is slightly earlier than our expectations. We had also been flagging the growing need to cut deposit rates further, due to growing deflationary pressures, hence the symmetric nature of the cut did not surprise us. The central bank will desperately want to avoid a period of negative real rates, due to the detrimental effect it could have on consumption and investment. It's also worth remembering the State Council announcement on Wednesday that fiscal spending will be accelerated and more tax breaks will be offered to SMEs, hence the move today is part of a coordinated policy response to counter weakness in growth.&nbsp;</p>

The PBOC announced on Saturday that it will cut the benchmark deposit and loan interest rates by 0.25 basis point starting March 1. We have been calling for another rate cut and 3 further 50 bps cuts of the reserve requirement ratio in the first half of 2015, and our expectations had been for a March rate cut, so this is slightly earlier than our expectations. We had also been flagging the growing need to cut deposit rates further, due to growing deflationary pressures, hence the symmetric nature of the cut did not surprise us. The central bank will desperately want to avoid a period of negative real rates, due to the detrimental effect it could have on consumption and investment. It's also worth remembering the State Council announcement on Wednesday that fiscal spending will be accelerated and more tax breaks will be offered to SMEs, hence the move today is part of a coordinated policy response to counter weakness in growth.&nbsp;

Shanghai Electric Group Company (601727 CH)

Haitong Securities Co Ltd (A) (600837 CH)

China Railway Construction Corp (1186 HK)

China Communications Construction (1800 HK)

Shanghai Pudong Development Bank Co. (600000 CH)

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Shanghai International Airport (600009 CH)

Inner Mongolia Baotou Steel Union (600010 CH)

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China Merchants Securities Co Ltd (A) (600999 CH)

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Shanghai International Port Group (600018 CH)

Beijing Originwater Technology Co,Ltd. (300070 CH)

China Merchants Securities Co Ltd (H) (6099 HK)

CHINA ECONOMY: Thoughts and implications post the rate cut  