Morning Brief – China news boosts sentiment

Market sentiment was boosted during the Asian trading session with stock markets moving higher and the US dollar currency coming under pressure due to support from the Chinese economy.

The EURUSD pair continued to gravitate higher, while the USDJPY pair posted more losses amidst a recognition that the Japanese central bank will begin to move away from its ultra-loose policy.

Markets looked past reports about the Chinese budget. A number of news outlets are out saying that Chinese Budget Deficit hit a record $1.1tn in the first 11 months of the year reflecting Covid zero damage.

Estimate shows that that was more than double the same period last year and larger than in 2020, the year when the government first introduced the policy amid the breakout of the pandemic.

It is likely that the government spending in China will persist, as seen today, and the fiscal support for the troubled property sector and to help firms cope with COVID setbacks.

The fiscal support will act as a tailwind for China’s economy and markets. Addressing the deficit does not seem to be a priority as the PBOC attempts to steer the country away from the worst financial crisis in decades.

Breaking down the measures announced today, the China Securities Regulatory Commission (CSRC) said they will support the transformation of the real estate development model.

Also, they will help high quality real-estate firms improve their balance sheet and will increase access to credit and support private enterprises to issue bonds and raise equity.

The PBOC also agreed to meet reasonable financing demand of property sector. And will strongly support recovery and expansion of consumption, key infrastructure, and construction of major projects in line with national development plan.

A separate report reflecting of ongoing economic troubles amid rising number of Covid cases as well as ongoing disruptive restrictions has been released with small and medium businesses reporting deteriorating business conditions, according to Standard Chartered data.

The National Health Commission confirmed reported suggesting that the system of counting Covid related deaths changed.