China is expected to ease its monetary policy in the first half this year following the country's recent reopening for cross-border travel as Beijing continues to stimulate domestic consumption and support vulnerable businesses, says SCB Chief Investment Office (SCB CIO).
The investment analysis division of Siam Commercial Bank believes the People's Bank of China (PBoC) is likely to further loosen its monetary policy in 2023 by lowering the required reserve ratio for commercial banks.
The move is considered vital after China abruptly lifted restrictions for foreign travellers from Jan 8, said the think tank.
"In our view, the reopening of the country this time is a result of both a sharp slowdown in the economy and the protests in the streets during November 2022," said Kampon Adireksombat, first senior vice-president at SCB CIO.
As part of strategies to stimulate its economy, China's central bank is expected to cut the minimum reserve ratio required for commercial banks during the first half.
The PBoC is also projected to implement measures that provide support for specific businesses, especially vulnerable enterprises, according to SCB CIO.
In addition, fiscal policies would be introduced as the Chinese government pushes for consumption growth, said the think tank. The fiscal measures would include supporting the use of electric cars and services related to elderly care.
SCB CIO projects Beijing will launch additional remedial measures for the real estate sector.
"The reopening of the country will help support the gradual recovery of the real estate sector. These are important factors that should help the Chinese economy to recover," said Mr Kampon.
Sectors set to benefit from the country's relaxation of travel restrictions are e-commerce, airline operators and food delivery businesses, said the office.
Financial institutions should also benefit, as the border reopening supports the expansion of loans. Income from transaction fees should also improve, he said.
From an investment perspective, Chinese equities offer a promising opportunity to benefit amidst the massive increase in Covid-19 infections, according to SCB CIO. Continued tension between the US and China should also pressure the market, said the office.
"We expect the number of infections to rise during the first phase, which could raise concerns in the market. However, we believe this represents a good investment opportunity going forward," said Mr Kampon.