Asia Stocks to Watch: China likely considering fresh policy easing

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) ? China could be on the verge of a fresh policy loosening to help stimulate the economy and guard against faltering export demand.

Chinese authorities are now considering a cut to banks? reserve requirement ratio (RRR), according to analysts, who say Beijing was likely alarmed over data showing credit growth in an apparent stall, following reports of weak bank lending in June.

Credit Agricole CIB said in a note Wednesday that authorities will need to loosen rules on the ratio of funds banks must set aside with the central bank.

The French bank?s analysts said the move, which would follow on the heels of an RRR cut in May, was ?needed to support the economy via boosting bank lending.?

Underscoring the concerns that not enough funds are circulating, the People?s Bank of China on Tuesday carried out a reverse repurchase auction, sending 143 billion yuan ($222.5 billion) into the banking system by buying up short-term notes.

The move was the largest such liquidity injection in six months. Read more on China?s reverse repos.

Protests halt metals plant in China

Local authorities in a southwestern Chinese city say they have canceled a planned factory following violent protests that have drawn widespread attention in China.

Meanwhile, Chinese state media reported Tuesday that Chinese banks issued far fewer yuan-denominated in June than expected, indicating a slowing economic conditions and what may be a weak appetite among corporations to take on new debt.

The four largest Chinese lenders extended 180 billion yuan in new local-currency loans for the month, a drop of 22% from a month earlier, according to report in the state-run Shanghai Securities News, citing an unidentified banking source.

The report also said weaker corporate demand would explain the drop, as short-term borrowings, considered a barometer of corporate appetite for loans, were among the softer data points. Read more on China?s June loan data.

Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.

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