{I-bank focus}China's August data calls for intensive easing

    BofA Merrill Lynch said China's August activity data slipped further after a weak July, with broad disappointment from domestic demand to external trade.
  The research house sees rising risks of achieving a 6% GDP growth in 3Q. Even if trade tension de-escalates in October, whether China can maintain a relatively stable growth path depends on how quickly and effectively a policy response is delivered.
  BofAML noted some indication that the government is on the move, but fiscal easing has yet to make a big impact on domestic demand so far. Given weaker growth momentum and still-tight financial conditions, it expects policymakers to adopt more intensive easing after the October Politburo meeting.
  Fiscal stimulus will likely focus on infrastructure investment, government bond issuance and credit expansion, rather than tax cuts. The government will rely more on infrastructure investment, mainly funded by LGSB (local government special bond), bank loans and bond issuance, to cushion the downside growth risks.
  The probability of an expansion of LGSB quota in 4Q is getting higher. Meanwhile, policymakers will likely relax financial regulation and use window guidance to promote credit creation, especially bank loans and bonds.
  However, if policymakers continue to drag their feet after October, BofAML sees the possibility of more disruptive adjustments down the road and downside risks to its growth forecasts.