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The View | Chinese stock market’s fast and furious April was rooted in fear of a monetary policy turn
- While China’s central bank has denied that a big monetary policy change is in the offing, recent signals suggest an era of accommodative policy is at an end
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The Chinese stock market experienced a “fast and furious” month in April. The market kicked off the month on an optimistic note following the release of stellar Purchasing Manager Index figures.
Many investors were hoping for another bull market, but quickly the major stock indices erased almost all the monthly gains towards the end of April. What caused this roller-coaster ride?
At first glance, the pullback does not make sense: China reported quite decent gross domestic product growth and economic activity numbers in the middle of April; China and the US are seemingly close to a trade deal; and US equity indices hit record highs recently.
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Nonetheless, all these seemingly positive factors failed to support the Chinese stock market. This is because the market fears that Chinese monetary policy is close to a tipping point.
However, we can hardly infer this from recent statements from the Chinese central bank.
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On April 25, Liu Guoqiang, deputy governor of the People’s Bank of China (PBOC), said in a media briefing that the central bank had no intention of either tightening or relaxing monetary policy.
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