China cuts reserve requirement ratio, historically….

63

… this meant higher equity prices down the road.

Insight:

The iShares China Large-Cap ETF tends to return +2.9%, on average, one month after the Central Bank in China (PBoC) cuts the reserve requirement ratio – based on the previous 10 cuts. Alibaba shares appear to perform strongly with average returns of +4.7% and 8 out of 10 occasions showing positive returns.

Story:

The PBoC cut lenders’ reserve required ratio, freeing US$154 billion of liquidity into the Chinese economy by reducing the amount of money banks have to keep in reserve.

Details:

NameAlibaba
ViewUp
Star (1 to 10)7.9
Target+4.7%
Time1 month
Hit Rate80%

Chart 1: Alibaba Shares 1 month after the ‘insight’

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