Traders Look to Politburo for Cues on China’s Growth Commitment

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Or sign-in if you have an account.(Bloomberg) — China’s Politburo meeting later this month will test Beijing’s commitment to supporting growth, with investors expecting targeted measures to bolster stability rather than a sweeping stimulus package. 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Bond traders expect ample liquidity but remain cautious about potential growth measures that could weaken demand for safe havens. Here is what investors and analysts are saying, and how some are positioning:Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againEva Lee, head of Greater China equities at UBS Global Wealth Management’s chief investment office Maintains positive view on China equities and expects the Politburo meeting to be supportive, though not deliver bazooka-style stimulus; expects volatility to stay elevated over the next 1-3 monthsFavors positions in AI infrastructure, semiconductor equipment, quality financials/insurers and power & equipment/grid operators, which could benefit from an accelerated rollout of fiscal spendingAlso favors adding CNY exposure to USD-based portfolios for currency diversificationSees gradual yuan appreciation, supported by attractive valuations, strong FX conversions and firmer People’s Bank of China fixings, though gains are likely to be limited as policymakers prioritize accommodative policy amid weak growth and inflationYongbin Xu, co-chief investment officer at U-Shine Investment Group Maintain a convergence trade of receiving two-year interest-rate swaps versus shorting government bonds, reflecting expectations for the upcoming meetingIncreased a curve-flattening trade by going long 30-year government-bond futures and short five- and 10-year contractsMarkets expect officials to at least signal more forward-looking and flexible policymaking and make greater use of existing monetary tools, a backdrop that would support bondsHomin Lee, a senior macro strategist at Lombard Odier Singapore Ltd.The leadership is likely to strike a more pro-growth tone, with added emphasis on stabilizing domestic demand and advancing technological innovationRemains constructive on both onshore and offshore opportunities in tech and consumer sectorsPrefers Chinese equity market within emerging market equity allocationLaura Wang, chief China equity strategist at Morgan StanleyInvestors remain cautious ahead of the Politburo meeting and CXMT’s expected IPO, watching for signs that policymakers will respond to soft second-quarter growth and weak domestic demandPolicymakers are likely to accelerate the rollout of the remaining in-budget fiscal quota, rather than introduce a supplementary budgetThey will also likely continue to prioritize technology self-sufficiency, advanced manufacturing and energy security over broad-based consumption supportJohanna Chua, head of emerging markets economics at Citigroup Inc.Expects measured support from policymakers, with stronger rhetoric on domestic demand, accelerated fiscal deployment in the second half and continued emphasis on utilizing existing policiesLikely focus in consumption will be on supply-side measures for services, with direct demand-side stimulus largely absentCapital markets are set to receive renewed policy attention amid recent market volatility; That said, a policy pivot of the magnitude seen on Sept. 24, 2024 remains implausible to usThis advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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