Credit Suisse sees more China reserve requirement ratio cut in 2022

The Swiss bank Credit Suisse logo is seen at its branch office in Zurich, Switzerland on November 3, 2021. Jan 28 Reuters -- Credit Suisse economists expect a further 50 basis point bps cut in China's reserve requirement ratio RRR in the first half of 2022, because the Asian economy is starting to relax while other countries are tightening.

China's central bank cut RRR last month, or the amount of cash that banks must hold as reserves, and released 1.2 trillion yuan $188.77 billion in long-term liquidity to bolster slowing economic growth amid persistent COVID 19 cases. The average RRR for financial institutions is 8.4%, according to vice governor Liu Guoqiang last week, adding that there was still room for the central bank to cut banks' RRR.

Credit Suisse has raised its rating to 'overweight' on Chinese equities, from 'benchmark' earlier, with earnings revisions for the tech sector and wider market.

In a note from Thursday, Andrew Garthwaite, Credit Suisse economist Andrew Garthwaite said that excess liquidity in China is beginning to improve M 1 relative to nominal GDP and Chinese equities tend to perform as this happens.

The brokerage believes that there will be 5.9% GDP growth in 2022, higher than the consensus prediction of 5.2%.

The Federal Reserve said on Wednesday it is likely to hike interest rates in March and reaffirmated plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged to be a sustained battle to tame inflation.