Deltec Bank & Trust Issues Investment Research Note Warning of Potential Trouble Brewing in Chinese Stock Market

Aug 5, 2020

  • Deltec Bank’s Investment Research team recently published note delving into flood of stimulus, ongoing Chinese equity market rally
  • China’s latest wave of stimulus revives the old model for growth: debt-fueled fixed asset investment
  • Fiscal, monetary boost to economy encouraging speculation within Chinese equity market, with stocks up 41% relative to March lows
  • Deltec Bank has cast doubt on recent rally sustainability, warning of similarities to 2015 bubble

Deltec Bank & Trust Ltd., a Bahamas-based private bank recently awarded the title of 2020’s ‘Best Private Bank in the Caribbean’ (, has published its latest investment research note entitled “Big Trouble in Little China?” ( The piece seeks to delve into the latest wave of stimulus to hit China’s economy while also exploring the sustainability of the ongoing Chinese stock market rally.

By cutting overnight interest rates, lowering reserve ratio requirements, and increasing directed lending by state-controlled banks, China has engineered yet another wave of stimulus. This is visible in measures of the ‘credit impulse’ – an aggregation of total social financing and other credit growth – which is rising by nearly 30% year-on-year. Deltec Bank’s research team warns that this impulse is reviving China’s old model for growth, debt-fueled fixed-asset investment, which it believes is…

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