PBOC Provides a Positive Surprise

In a surprise announcement, the People’s Bank of China (PBOC) announced it will inject liquidity into capital markets in a set of easing measures designed to support both the housing and stock markets. The actions came amid ongoing weakness in housing prices and slowing consumer spending, which has weighed on growth and raised the specter of deflation. Falling US rates have driven a weaker US dollar and may have given the PBOC some additional room to maneuver. Chinese equity markets have ralled on the news, which has been broadly viewed as positive for Chinese equity market outlook.