China’s food prices look to be peaking, with vegetable prices falling in the second half of November after government efforts to boost supplies and impose price caps took effect. Still, the CPI last month increased at its fastest pace in more than two years. The two required reserve ratio (RRR) hikes in November resulted in some acute liquidity shortages toward the end of the month, but these appear to have dissipated in the first week of December. We expect the central bank to hike interest rates by 25 basis points (bps) in the coming weeks.
Related: iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI), PowerShares Gld Drg Haltr USX China(ETF) (NYSE:PGJ), Morgan Stanley China A Share Fund, Inc. (NYSE:CAF)