MARKET OUTLOOK - China's Focus on Local Government Debt Eases Financial Conditions and Boosts Investor Risk Appetite

Forex - Morningstar's senior equity analyst Iris Tan stated that China's financial easing focused on local government debt is likely to increase investors' risk appetite and boost market confidence in the short term. Following the upward revision of the special bond quota, Tan indicated that local government bond issuances are expected to accelerate in November and December, arguing that the financial easing would help compensate for the losses in land sales. According to Tan, local government land sales have fallen from the peak level of 8.5 trillion CNY in 2021 to 5.7 trillion CNY in 2023, a decrease of 3 trillion CNY. However, she adds that while the short-term financial burden has decreased, the overall debt pressure remains high.