Chinese Stimulus Looks More Likely: Strategist

Beijing, China
Sam Diephuis | Getty Images
Beijing, China

With China approaching a leadership transition and the economy continuing to show signs of weakness, the government will likely embark on a fresh stimulus program, Dan Greenhaus, chief global strategist at BTIG, told CNBC’s “Squawk on the Street” on Thursday.

Data released on Thursday showed a 6.2 percent drop in Chinese industrial productionin August which has the potential for nasty knock-on effects for Chinese companies’ earnings.

The People’s Bank of China also made a $58 billion injection into money market funds this week to fend off a potential credit crunch at the commercial banks in the short-term. (Read More:PBOC Makes Record Cash Injection to Fend Off Crunch.)

But despite the slowing growth and the slump in the stock market in Shanghai , leaders have not announced a bold stimulus plan to revive growth ahead of the coming leadership transition. (Read More: China Tied Up by Transition as Its Economy Loses Force.)

Greenhaus is optimisticthat Chinese officials will act eventually. “Certainly, going into a change in leadership the bias is going to be for more stimulus rather than less,” he said. “You want a tailwind going into the leadership change and a tailwind coming out.”

But there’s ongoing uncertainty as to when a leadership transition will take place. “We still don’t have a date for the People’s Congress, so there’s a bit of uncertainty that needs to be cleared up,” Greenhaus added.