Home Aviva Capital PboC Steps Up Liquidity Drain.

Aviva Capital PboC Steps Up Liquidity Drain.

Press Release: February 26, 2010

Aviva Capital apparently believes that the general negativity in markets linked to the Peoples Bank of Chinas (PBoC) decision to raise the reserve requirements for commercial banks is misplaced and unjustified.

China revealed a massive stimulus effort to sustain growth through the global financial crisis and this powered a significant expansion in its money supply.

Analysts at Aviva Capital said that an excessive expansion of money supply was always likely to stimulate the onset of asset bubbles and the PBoC was quite right to drain liquidity from the economy to avoid future instability.

The analysts also suggested that it was unlikely that the countrys appetite for raw materials like copper and crude oil would abate in the months ahead due the continued expansion of the countrys middle classes who have resolutely joined the wave of domestic demand that the Chinese authorities were keen to develop in the face of dwindling demand from its main export markets.

Sources close to Aviva Capital and believe that as the Chinese stock markets have grown significantly since the credit crunch, now would not be a good time to take up significant positions since the firm expects a correction in line with other global bourses. The sources did, however, say that Aviva Capital is analyzing several banking and credit card companies for possible investment on the next significant price dip.

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