China: Moderate recovery still on track – Danske Bank

Danske Bank analysts suggest that for the Chinese economy, April PMIs fell back but are still clearly off the lows and they continue to look for a moderate recovery in 2019.

Key Quotes

“Leading indicators still point to improvement

• Lower yields point to a lift to home sales. Construction is robust due to low inventories.
• Commodity prices point to moderate recovery.
• Credit impulse is improving.
• PMI exports have rebounded.”

“We look for a US-China deal in late May or early June to ease the trade war uncertainty further. We see a 50-50 chance of a further cut in the Reserve Requirement Ratio. We expect more targeted lending and stimulus towards consumer durables.”

“We expect USD/CNY to grind lower towards 6.60 in 12 months on economic recovery and a trade deal.”