China Monthly: Monetary accommodation will continue
摘要： Economic outlook: We reiterate our view that the economic growth will surprise on the downside in
Economic outlook: We reiterate our view that the economic growth will surprise on the downside in H1, as the economy faces a "double whammy" due to property slowdown and a fiscal slide. We believe the fiscal slide has started, as total government fiscal revenue dropped by 0.1% yoy in Q4 2014, and it will worsen quickly in H1 2015. We think the fiscal slide happened as a surprise to the market and the government. We believe the policy makers have started to realize the impact of the fiscal shock on the economy, and they will likely loosen fiscal and monetary policies aggressively in H1.
Main risks: We see rising downside risks to our GDP forecast of 7% in 2015. We are comfortable with our forecast of a sharp slowdown in H1 to 6.8%. The downside risks are mostly in H2. We expect a rebound to 7.1% in Q3 and 7.2% in Q4, as we see aggressive policy easing on both fiscal and monetary fronts. But policy stance has been tight so far with little signal to change, particularly on the fiscal front.
Strategy: We maintain overweight duration on cash bonds supported by policy accommodation and improving liquidity condition in H1.
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