Moderate easing on horizon in H2

- Jun 21, 2019-

Central bank most likely to cut RRR of financial institutions, says analyst

China's monetary authorities may moderately ease their overall prudent policy stance in the second half of the year, helping to anchor economic growth and the stock market, analysts said on Thursday.

Chinese stocks rallied on Thursday after the US Federal Reserve's dovish signal raised investors' expectation of more ample global liquidity.

The benchmark Shanghai Composite Index rose 2.38 percent to close at 2987.12 points, while the smaller Shenzhen index closed 2.34 percent higher at 9134.96 points on Thursday, with brokerages and companies related to environmental protection leading the rise.

The latest meeting of the Fed's policy-setting Federal Open Market Committee left its key interest rate unchanged, but signaled that it is prepared to start cutting rates, if this is required to shield the US economy from trade tensions and other threats.

After the meeting, Goldman Sachs Group Inc analysts released a report saying they expect the Fed to cut interest rates in July and September.

"In the long term, the Fed is expected to proceed with rate cuts in a fairly slow and smooth way," said Cheng Shi, chief economist of ICBC International.

This will enlarge the monetary policy room of other major economies and expedite the change toward an easing global monetary environment, which will in turn lift the sentiment of global stock markets, Cheng said.

Monetary authorities from both developed and developing economies have become more dovish this year, some of which-such as in India, New Zealand, Australia and Russia-have cut their interest rates. The European Central Bank said on Tuesday it is ready to provide further stimulus as well.

As for China, the wider policy room provided by the Fed's dovish tone-as well as this year's controllable inflationary pressure-is expected to trigger monetary easing measures in the second half of the year, said Zhang Yu, chief macroeconomic analyst with Hua Chuang Securities, based in Guiyang, Guizhou province.