Citi: More Bad Than Good For China Right Now

Stocks are on the rise around the world on Tuesday following new Chinese central bank policies aimed at supporting its ailing economy.

While the moves have been perceived as good news by investors, Citi Research’s latest weekly track-chart on the Chinese stock market is still showing more negative indicators than positive ones.

The Moves

The People’s Bank of China (PBOC) announced that it is cutting its one-year bank lending benchmark rate by 0.25 percent to 4.6 percent and reducing one-year benchmark deposit rates by the same amount.

In addition, the PBOC is reducing the reserve requirements (RRR) for most big banks from 18.5 percent to 18.0 percent.

Related Link: China Complicates Matters For The Fed

Hoping For A Different Outcome

The latest moves by the PBOC came in response to another 7 percent decline in the Chinese stock market on Tuesday following the 8 percent decline on Monday.

The Chinese government has been fighting hard to support the economy and the market. When the Chinese market crashed by more than 30 percent earlier this summer, China responded by committing hundreds of billions of dollars to state-backed share purchases.

Citi’s Gloomy Outlook

The PBOC is hoping that the Chinese markets will react the same way the rest of the world has reacted so far to the new policies, but Citi’s latest weekly track-chart indicated much more bad news than good news.

Only three of Citi’s 12 indicators are currently positive, while seven of the indicators indicate an unfavorable equity environment for investors.

For now, investors are hoping that the estimated $101 billion that the RRR cut injected into the economy will be enough to overcome the overwhelmingly negative Chinese stock market environment.

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