From Mac Bank:
Moderated growth in June: The current mini-cycle peaked in March and has slowly moderated since then. For June, industrial production (IP) growth could slow to 5.6% yoy from 6.0% in May. China will also release GDP growth for 2Q16, which could come in flat at 6.7% yoy. That said, nominal GDP growth, which accelerated to 7.2% in 1Q16 from 6.0% in 4Q15, could edge up on easing deflation. Since the economy still looks steady, policy should stay put for now. But given the current trend, it’s likely that policy might turn expansionary again in summer (see side table for forecasts).
RMB under pressure on Brexit: While we expect Brexit to have a very limited impact on the Chinese economy (link), the impact is likely to be concentrated in RMB, which could depreciate to 6.8/US$1 in the next couple of months. That said, we are comfortable with our year-end forecast of 6.6 as our house views expects the Fed to delay rate hikes to December. In the near term, China’s capital outflow pressure could also intensify again but we think it is manageable. We expect FX reserves to drop US$20bn in June and probably more in July. Thus, the PBoC might cut the RRR again in late July.