Investors less concerned about a hard landing in China.
According to BNP Paribas, rather than just a few data points, a slew of growth statistics showed July improved on June and the preceding months, far better than the market expected.
If such an improvement proves sustainable, it should cheer investors and bode well for capital markets. In fact, investors have become much less concerned about a hard landing in China since the July economic statistics were published. BNP Paribas noted five of Chinese economy's most notable improvements.
1 PMI. CLFP PMI defied market expectations and reversed the downward trend to 50.3 in July, albeit up by only 0.2pp from June.
More importantly, the sub-PMI supporting the improvement are meaningful; including production (+0.4pp), new orders (+0.2pp), new export orders (+1.3pp), order backlog (+1.8pp), finished-goods inventory (-0.9pp), purchasing quantity (+0.5pp), input prices (+5.5pp) and employment (+0.4pp).
Flash HSBC PMI is also reported to have reversed the downtrend and to date has reached 50.1 for August, a large improvement from 48.2 in July, 49.2 in June and 50.4 in April.
2 Industrial output. VAIO (value-added industrial output) rose 9.7% in July, up from 8.9% in June. VAIO growth continued to scale down from 9.9% in Jan-Feb. Annualised VAIO month-on-month growth is high, at 11.1% in July. The improved industrial production is from steel (up 10.9% in volume terms), glass (14.1%), chemical products (10.3%), PC (17.5%) and vehicles (15.4%, sedan 11.9%).
3 Power generation/consumption and cargo shipment. Improvement in industrial output growth is well supported by power generation (up 8.1% compared with 6.1% in June, 4.1% in May), power consumption (8.8% vs. 6.3% in June and 5% in May) and freight turnover (up 10.9% in July, compared with 10.5% in June, 9.6% in May and 7.9% April).
4 International trade. Exports swing up 5.1% compared with down 3.1% in June, and imports surged 11% against a decline of 0.7% in June.
5 Fiscal revenues. National fiscal revenues rose 11% compared with 7.5% in 1H13. Among these, central fiscal revues improved substantially, growing 8.8% in July compared with only 1.5% in the first half.
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