Happy Friday from Copenhagen!

The fiscal briefing in China tomorrow will be crucial, as inflows into the country have significantly diminished in recent days. This highlights the need for a constant stream of positive news to sustain the rally. Given the expectations building around the message from Chinese authorities, we don’t have high hopes that they will exceed market consensus. However, we will need to assess that in the coming days.

Bloomberg reports that the consensus for the fiscal package is around $283 billion USD (approximately 2 trillion Yuan).

In my view, this falls well short of the true whisper estimates, with many of our counterparts suggesting figures in the range of 2.5-3 trillion Yuan during discussions. To turn more bullish on China in a sustained way, we would need to see more than 3 trillion Yuan announced, or more importantly, an open-ended program (e.g., a specified amount of Yuan in direct transfers per month) until sentiment and consumption improve.

Limited or capped wallet programs tend to be far less effective than open-ended ones, or at least those perceived as such.

Chart 1: Chinese inflows are receding