Portable Alpha

China: Expectations for Fiscal Expansion a Little Hasty

Bloomberg reports that "People's Bank of China sold three- month sterilization bills in open-market operations today", the 15 billion yuan ($2.2 billion) bills are sold at 3.2754%, "8 basis points less than the 3.3570 percent at the previous auction on Sept. 25"
www.bloomberg.com/apps...

I've written in a note on Sep 24, forecasting 2'070 points by Oct 10 for SSE Index. We might witness a short-term correction in the next couple of weeks, since according to "He Xin, chief fixed-income analyst at Shenzhen-based China Jianyin Investment Securities", that "The decline in the yield means 'open-market operations in October will also see a net capital injection into the market,' " in reference to the 3-month bill auction. Nonetheless, medium- to long-term trend bearish movements remain intact and inexorable.

The PMI in September fell to 47.7, a sharp decline from August's 49.2, PMI in Q4 shall continue heading down [likely 45.9 for Oct, etc.]. Exports have been down as well, even the dollar might rally in the coming weeks, it wouldn't subdue much of the negativity for Chinese exports.

I guess benchmark SSE might fall around 1'400 around Mid-Jan to Early Feb, 2009.