Beware China Trust "Scare Story" But PBOC can Manage - RBS

0500 GMT [Dow Jones] The prospect of defaults among Chinese shadow banks will create "scare stories" during the months ahead, creating headwinds for risk assets and posing the potential for the People's Bank of China to pause policy tightening, says Royal Bank of Scotland. "If push comes to shove, monetary policy settings will be eased," says Louis Kujis, chief China economist at RBS. Risks around the CNY10bn trust industry, which is currently experiencing financial stress, were likely to be containable, he adds. But the rapid development of cheap money market funds, offered by companies such as Alibaba and Tencent (0700.HK), should be watched closely as they are currently not well-supervised, Kujis adds. The PBOC drained CNY48 billion through an offer of 14-day repurchase agreements in an open market operation today, traders said, a week after it let a net CNY450bn drain from the banking system through reverse repo maturities.

(END) Dow Jones Newswires
February 18, 2014 00:00 ET (05:00 GMT)