China Tilts to Targeted Stimulus to Stabilize Growth

Authorities rolled out incremental support: selective property purchase restrictions were eased, mortgage rates reset mechanisms refined, and local governments received guidance to complete stalled projects. The PBoC complemented fiscal steps with RRR tweaks and facility usage, while state funds increased equity purchases to bolster sentiment and valuations.

Transmission remained patchy. Private developers faced constrained funding access, and consumers were cautious amid labor market uncertainty. Exports steadied but capex intentions stayed muted outside strategic sectors. The currency held within managed ranges as policymakers balanced support with financial stability and external perceptions of excess easing.

We added selectively to A‑shares with policy alignment—utilities, grid, and SOE reform beneficiaries—while trimming cyclicals dependent on rapid property recovery. We used options around China equity indices to manage event risk and held a barbell of defensives and exporters with diversified end markets. Commodity hedges were retained given uneven demand signals.

In client portfolios, we nudged EM Asia weights higher within risk budgets, paired with USD and JPY hedges. We set milestones—property sales throughput, credit impulse, and earnings revisions—to scale exposure. Duration remained neutral, with scope to extend if disinflation persisted and external growth slowed enough to reprice global curves.