The prospect of financial sector deleveraging in China increases the risk of a hard landing - despite yesterday's goldilocks GDP print (and ugly miss in IP). Although the probability of the hard landing is still low, Morgan Stanley warns it’s not low enough to make hedging costs irrelevant: The new government's policy drive to deleverage the banking sector has become more apparent, and they think this deleveraging will likely continue to unfold in the next 6-12 months. In MS' Super-Bear scenario, they expect aggressive policy tightening to reduce 2H13 GDP growth to 5.5% YoY. In this scenario, policy-makers are also ... (full story)