China: October money and credit data both surprise on the downside – Nomura

Analysts at Nomura note that China’s October money and credit data surprised on the downside, mainly due to the ripple effects of the initially over-zealous deleveraging programme and despite the 100bp reserve requirement ratio (RRR) cut that became effective 15 October.

Key Quotes

“New RMB loans fell to RMB697bn in October from RMB1,380bn in September, with new loans to the corporate sector shrinking sharply. Aggregate financing slumped to RMB729bn from RMB2,168bn in September, mainly weighed on by a sharp fall in local government special bond (LGSB) financing (RMB87bn from RMB739bn in September) and continued shadow banking shrinkage.”

“Outstanding loan growth eased to 13.1% y-o-y from 13.2% in September, M2 growth fell to 8.0% y-o-y from 8.3% in September and M1 growth fell more sharply to 2.7% y-o-y from 4.0%. Growth of outstanding aggregate financing slowed to 10.2% y-o-y from 10.6%. Including central and local government bond issuance, growth of our augmented aggregate financing measure dropped to 10.7% y-o-y in October from 11.2% in September.”

“Looking ahead to November and December, we expect more downside pressure on aggregate financing.”