LONDON (Reuters) – Citi on Tuesday trimmed its China growth forecast for next year to 4.9% from 5.5%, citing expected spillover from the woes of embattled property giant Evergrande, and predicted policy makers would deliver more interest rate reductions.
“The balancing between moral hazard risks and contagion risks points towards a managed restructuring,” Citi’s Xiangrong Yu wrote in a note to clients.
“The pressure on growth will likely trigger some restrained policy easing, including a 25bp interest rate cut in 2022E,” he said, adding he now also expected an anticipated 50 bps reduction of the reserve ratio requirements to be advanced to October.
Citi also reduced its targets for various Chinese equity indexes, saying it expected Hong Kong’s main index to end the year at 26,800. The index last traded at 24,500.
(Reporting by Karin Strohecker; editing by Dhara Ranasinghe)