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  • RBA continue taper, China brands online gaming 'spiritual opium'

RBA continue taper, China brands online gaming 'spiritual opium'

Notable moves overnight:

  • AUD rallies on RBA decision

  • NZD rallies after mortgage/housing policy announcement

  • Tencent tumbles 10% on CCP gaming crackdown

RBA stuck with the decision to gradually taper QE and did not react to the recent lockdown announcements.

Monetary policy is already highly accommodative and they expect the economy to recover quickly once lockdown is lifted, with the employment impact more in a reduction of hours rather than a rise in unemployment.

Some were expecting a reduction in the pace of taper.

Links:

RBNZ are getting ready to tighten mortgage lending standards as house prices are above their 'sustainable level'

We propose to restrict the amount of lending banks can do above an LVR of 80 percent to 10 percent of all new loans, down from 20 percent at present. We will begin consulting on this change later this month with a view to introducing it from 1 October 2021.

“We also intend to consult in October on implementing Debt-to-Income (DTI) restrictions and/or interest rate floors in an effort to provide further comfort that borrowing is sustainable. Introducing DTIs will take longer, whereas the banking industry has informed us that interest rate floors could be implemented more quickly.

“Consultation will be focused on operational feasibility and possible calibration of these tools, including their impacts on investors and first home buyers,” Mr Bascand says.

The key 'hawkish' phrase?

We have spoken and written a lot about the many drivers of the current high house prices in New Zealand. We acknowledge that one of these reasons are the low interest rates due to our response to the COVID-19 economic shock.

However, Governor Orr didn't sound like an all-action man of purpose (nor ready for six hikes by the end of 2022 as ANZ expect) when he said:

The Reserve Bank’s Monetary Policy Committee needs to think about when and how we would return interest rates to more normal levels, which are neither unnecessarily giving the economy a push forward nor holding it back.

Our next opportunity to publicly address this issue is the 18 August Monetary Policy Statement.

Maybe just some expectation management.

Here's the details:

 House prices are above their sustainable level and we are now now considering tighter lending standards to reduce the risks associated with excessive mortgage borrowing. Read Adrian Orr's article here 👉 https://t.co/qSb4H1uLj5 #rbnz pic.twitter.com/T5XytjP6dO— Reserve Bank of NZ (@ReserveBankofNZ) August 2, 2021 

And back to China again.

While big investors/groups say the regulatory crackdown will pass, there's a lot going on...

Let's start with the big mover.

Chinese authorities have decided they don't want basement-dwelling gamer virgins.

Tencent Holdings Ltd (0700.HK) shares were on track to fall by their most in a decade on Tuesday after a Chinese state media outlet branded online video games "spiritual opium", stoking concern that the sector may be next in regulators' crosshairs.

China's biggest social media and video game firm saw its stock tumble more than 10% in morning trade, wiping almost $60 billion from its market capitalisation.

The newspaper repeatedly cited Tencent's flagship game, "Honor of Kings", which it said was the most popular online game among students who sometimes played for up to eight hours a day.

"No industry, no sport, can be allowed to develop in a way that will destroy a generation," the newspaper said, likening online video games to "electronic drugs".

Fits in with the other moves to get ahead of the demographic cliff.

While they unofficially set 'Buy Chinese' targets 👇👇

Which kind of goes against the whole trade deal & WTO rules thing they agreed to...

And there's a new congressional report on Covid origins alleging that the virus leaked from a Wuhan lab in August or September 2019...

And we're right back to Wuhan again...

Non-performing loans are on the rise, bank credit ratings are downgraded...

And Evergrande's failures are pressuring high yield bonds too...

In the US, Waller is firmly with the hawks and calling for a taper if the next two monthly jobs reports each show employment rising by 800,000 to 1 million...

Something to keep an eye on later today is Gensler's speech at the Aspen Security Forum

He's already been chatting to Bloomberg...