China Market Monito: Stocks and CNY Taking a Hit

Fundamental analysis of Forex market

To help keep track of developments in Chinese financial markets, we publish a brief China Market Monitor covering FX, fixed income, money markets and equities.

Financial stress has risen sharply since the trade conflict with the US escalated on 15 June. CNY and equities have tumbled and bond yields are lower following monetary easing through reductions of the reserve ratio requirements (RRR) for banks.

We believe that the People’s Bank of China will soon step up intervention to stem the downward pressure on CNY. However, we see downside risks to CNY in the medium term related to an escalation of the US-China trade war and diverging monetary policy.

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