China growth optimism slumps back to 'lockdown lows'; big stimulus unlikely, says BofA survey

China growth optimism has slumped back to lockdown lows and no fund manager at BofA Securities latest survey anticipated a stronger China growth going ahead. China growth optimism in the September fund manager survey (FMS) is actually lower than in the September 22 FMS, just before the China reopening, BofA said in its survey finding.

Against a 10 per cent rise in the BSE Sensex, China's benchmark Shanghai Composite index has stayed flat year-to-date. BofA said the consensus is that policy in China will be limited to fine-tuning the real estate or property market (55 per cent) with no meaningful stimulus (15 per cent). Only 12 per cent of fund managers in the survey expected fiscal 'bazooka' stimulus from China while a mere 4 per cent expected big monetary 'stimulus' i.e. rate cuts.

Policy expectations for China over the next 6 months are low, the survey concluded.

To recall, China in August cut its one-year benchmark lending rate, as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged amid broader concerns about a rapidly weakening currency.

China's central bank and financial regulator recently issued notices to ease some borrowing rules to aid homebuyers, including lowering the existing mortgage rate for first-home buyers and the down payment ratio in some cities. The Chinese finance ministry recently unveiled a package of tax relief measures for small businesses and rural households, Reuters reported.  Besides, the Chinese cabinet approved guidelines for planning and construction of affordable housing.

A total of 222 participants with $616 billion in assets responded to BofA's Global FMS questions and 141 participants with $276 billion in assets responded to the regional FMS questions.

Ne-net the survey suggests investor sentiment no longer stays extreme bearish (17-month high in global equity allocation), but is not yet bullish (FMS cash level up to 4.9 per cent). A total of net 53 per cent fund managers are pessimistic on global growth but just 21 per cent see hard landing and 27 per cent expect no recession at all.

Inflation expectations have jumped to highest since May 2022. Sticky inflation and hawkish central banks still seen as biggest tail risk, as per the survey.

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