(Yicai Global) June 28 -- Expectations for a weaker yuan have dented Standard Chartered's China confidence and small- to medium-sized enterprise growth indexes for this month.

The growth momentum index plunged to 10.7 in June, compared with 15 last month, data from the Britain-based bank shows. The slowing expansion resulted in the SME confidence index declining 2.3 points to 56, while the three sub-indexes, which cover current performance, expectations and credit conditions, all slipped, with the latter winding up the lowest at 51.7.

The real economy showed signs of stagnation this month, mainly due to cooling demand as a result of slower economic growth and stalling exports, squeezed corporate profits on rising raw material prices and deteriorating funding conditions for SMEs, Standard Chartered said in an accompanying report.

China's property market, export industries and private companies will face resistance in terms of growth due to falling investment sentiment, growing trade frictions between China and the United States and tight credit conditions, the report added. The Chinese economy grew faster than expected at 6.8 percent in the first quarter, but Standard Chartered maintains the rate will fall to 6.5 percent in the second half of this year.

Slowing economic growth has raised the possibility of a more accommodating monetary policy, it said. Deleveraging will likely continue, though it will be conducted mainly via regulatory means rather than monetary policy tightening.

The reserve requirement ratio cuts announced this month aim to boost lending to smaller companies and will provide liquidity for debt-for-equity swaps, the report added, holding to an earlier forecast that the central bank will cut the ratio by 3 percentage points by the end of next year to stabilize credit growth and reduce financing costs.

Market expectations for the yuan's depreciation against the dollar have increased again, but are substantially lower than levels in late 2015 and late 2016. Among over 500 SMEs polled, some 21.1 percent project the yuan to fall against the greenback, up 17.7 percent from last month's survey, the bank said.

The proportion of businesses projecting the yuan to appreciate declined for the fourth straight month to 19.3 percent, while more than half expect fluctuations within a certain range. The tension between China and the US has hit market confidence and is impacting currencies, the report added, noting that the yuan is still stable against many currencies.

Editor: James Boynton