The People’s Bank of China cut its reserve ratio – the amount of cash that banks have to hold in reserve – during September, releasing liquidity totalling 900 billion yuan in a move designed to support China’s faltering economy. This represented the third cut to the reserve ratio so far this year.
- China’s shipments to the US fell sharply
- India announced substantial cuts to corporate tax rates
- Brazil’s key Selic rate was cut by 50 basis points to 5.5%
To view the series of market updates through September, click here
The People’s Bank of China (PBC) cut its reserve ratio – the amount of cash that banks have to hold in reserve – during September, releasing liquidity totalling 900 billion yuan in a move designed to support China’s faltering economy. This represented the third cut to the reserve ratio so far this year, following reductions in January and May. China’s economic growth is flagging against a backdrop of deteriorating sentiment exacerbated by its trade conflict with the US.
“China’s economic growth is flagging against a backdrop of deteriorating sentiment”
Export activity posted an unexpected drop during August, dampened by a decline in shipments to the US. Exports fell at an annualised rate of 1% during the month, having risen by 10.3% in July, and imports fell by 5.6%. Shipments to the US fell by 8.9% year on year, and imports from the US dropped by 27.5%. This decline reflects August’s sharp escalation in hostility between the two countries. During September, although both countries made some minor concessions in their ongoing trade dispute, their conflict remained unresolved.
Elsewhere, growth in China’s industrial production continued to lose momentum during August. Output rose at an annualised rate of 4.4% in August, compared with growth of 4.8% in July. Retail sales also softened: sales growth moderated from 7.6% in July to 7.5% in August.
In an interview with Russian news agency TASS, China’s Premier Li Keqiang warned that China’s economy faces “downward pressure” caused not only by slowing global growth, but also by an increase in protectionism and unilateralism. His words stoked speculation that central bank policymakers might ease monetary policy. The Shanghai Composite Index rose by 0.7% during September.
India’s Finance Ministry announced substantial cuts to corporate tax rates during the month. The rate of corporate tax for domestic companies was reduced from 30% to 22%, resulting in an effective tax rate of 25.17 %. Meanwhile, new domestic manufacturing companies will be allowed to pay tax of 15% – and effective tax rate of 17.01%. Share prices jumped following the news and over September as a whole, the CNX Nifty Index rose by 4.1%.
Officials at Brazil’s central bank expect the country’s economy to have expanded “slightly” during the third quarter of 2019. The Copom – the monetary policy committee – cut Brazil’s key Selic interest by one-half of a percentage point to 5.5% during the month. The benchmark Bovespa Index rose by 3.6% over September.
A version of this and other market briefings are available to use in our newsletter builder feature. Click here
