Rate cuts in China suggest the country is speeding up its easing measures to combat slowing growth, say fund managers.
"Given the apparent shift to more aggressive easing, we now expect an accelerated pace of monetary easing for the rest of 2015, in effect front-loading the stimulus we had expected for 2016," says Craig Botham, emerging markets economist at Schroders.
Botham says the rate cuts, announced this weekend, may imply that April's economic data is weaker than expected, which trade and Purchasing Managers Index data has already suggested.
"We think GDP growth is likely to slow further in Q2," he adds.
The rate cuts, which came into effect on May 11, reduce the lending and deposit rates by 25 basis points each to 5.1% and 2.25%. The central bank also raised the ceiling for the deposit rate to 1.5 times.
Suranjan Mukherjee, portfolio manager of the Fidelity Asian Special Situations Fund, says the move by the People's Bank of China, "signals their concerns over slowing growth".
"Misallocation of capital is still rampant in some industries and bank balance sheets continue to carry unproductive assets," he says. "Further, capacity utilisation is expected to be structurally low across these sectors leading to lower pricing power as evidenced by negative PPI [Producer Price Index] and deteriorating return on invested capital."
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