Remarks by China's President Signal Easing - Morgan Stanley

June 19, 2012 8:28 AM EDT
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China's President Hu Jintao made remarks recently that suggest he endorses "broad-based" policy easing, according to analysts.

In a research note today, Morgan Stanley economist Helen Qiao noted comments Hu made during an interview this week with a Mexican newspaper, where he called for measures to ensure growth is driven by consumption, investment, and exports. With repeated emphasis on promoting consumption-driven growth, Hu's comments mark an interesting shift in tone.

These comments outweigh early comments by Hu that expressed fears China's government might over-stimulate the economy and create inflation. Qiao thinks the comments may have paved the way for China's June 7th rate cut, and could signal opposition to easing has ended.

iShares FTSE China 25 Index ETF (NYSE: FXI) is expected to open flat on Tuesday, as shares in on the Hang Seng index lost 0.06 percent yesterday. FXI is lower by close to 4 percent year-to-date, but has rallied nearly to 4 percent in the past 5 trading sessions.

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