In light of the recently released data out of China J.P.Morgan note that “details of the October credit report show divergent credit support.”

• “Medium- to long-term loans to the corporate sector retreated, and medium- and long-term loans to the household sector contracted, likely more a reflection of renewed weakness in home purchase demand as the impulse from August-September mortgage policy relaxation gradually fades. Shadow credit contracted 257 billion yuan in October, the largest monthly contraction in 15 months.”
• “We estimate that the remaining special LGB quota this year is 133bn yuan. Along with the scheduled 1tn yuan central government bonds issuance before year-end and ongoing special refinancing LGBs issuance, government bonds supply will be relatively heavy in November and December.”
• “We think the PBOC will need to expand OMO/MLF to inject net liquidity into the banking system, and we expect another 25bp RRR cut before the year-end.”
• “Moving into 2024, we expect the PBOC’s monetary easing will continue, with a 10bp policy rate cut in 3Q24 and two RRR cuts (25bp each) throughout the year.”