Macro Monday-Major macro themes of the past week:A busy week to come

China market outperformed last week amid global selloff: Last week,growth fears intensified in global market as stocks and oil prices tumbled.

    China stocks dropped as well but still outperformed (MSCI China down 1.2%).

    The coming week is heavy in terms of data (3Q GDP and Sep data: Oct 21)and event (4th Plenum: Oct 20-23). We expect incoming data to confirm a mildrecovery in Sep after the sharp fall in Aug. For 3Q as a whole, GDP growthmight fall to 7.1% yoy from 7.5% in 2Q. For the 4th Plenum, the main focus isjudicial reform (pre-determined theme: “Rule of Law”). From a medium termperspective, it might help lower risk premium if it could make the current anticorruptioncampaign more normalized and the whole Chinese society morerule-based. Meanwhile, all eyes will continue to be on Stock Connect, which issupposed to be launched on Oct 27, but still not confirmed yet.

    Policy easing underway: Unsurprisingly, with disappointing Aug data, policymakers are intensifying their effort lately. This week, the PBoC will injectanother RMB200bn into 20 commercial banks through SLF, after the injectionof RMB500bn in Sep to five biggest banks. Combined together, the liquidityreleased exceeds one full RRR cut. Last week, the central bank also sentfurther easing signals by pushing money market rates sharply lower (Fig 29-32). The PBoC took action after the release of soft Sep credit data lastThursday, which is largely due to weak shadow banking activities. Meanwhile,inflation pressure is muted at this moment, presenting a benign backdrop forpolicy easing (Fig 46).

    Exports remained a bright spot but sustainability in doubt: Sep tradedata came in stronger than expected. Exports growth jumped to a 19-minthhigh while imports rebounded after two months of contraction. Demand fromEurope and the US held up well, while exports to HK surged (Chart below).

    However, given the sluggish global economy, the strong export number inSep might be a blip and export growth could slide in 4Q again.