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9 Nov 2015
China: October trade weaker than expected - Nomura
FXStreet (Bali) - After the disappointing Chinese trade data in October, Nomura Asia Economics Team maintain its call of moderate fiscal stimulus and an accommodative monetary policy bias.
Key Quotes
"Export growth fell to -6.9% y-o-y in October from -3.7% in September in USD terms, due to sluggish external demand. Import contraction moderated to -18.8% y-o-y from -20.4%, largely due to base effect and higher imported commodity prices rather than better domestic demand."
"For October core activity data, we expect industrial production growth to remain at 5.7% y-o-y and fixed asset investment growth to edge down to 10.0% y-o-y (ytd)."
"We remain cautious on China’s near-term external outlook, expecting export growth to stay in negative territory in Q4, as there is still no sign of a rapid rebound in external demand."
"On the policy front, we maintain our call of a moderate fiscal stimulus from the central government. After the cuts to the RRR (50bp) and benchmark interest rates (25bp) on 24 October, we expect no more RRR or rates cuts this year, but expect four RRR cuts (50bp each) and two benchmark interest rate cuts (25bp each) in 2016."
"China’s October adjusted FX reserves unexpectedly rose by USD17.8bn m-o-m (Previous: -USD44.4bn), which was contrary to our and markets’ expectations given the People’s Bank of China (PBoC) was reportedly intervening to support RMB in October."
Key Quotes
"Export growth fell to -6.9% y-o-y in October from -3.7% in September in USD terms, due to sluggish external demand. Import contraction moderated to -18.8% y-o-y from -20.4%, largely due to base effect and higher imported commodity prices rather than better domestic demand."
"For October core activity data, we expect industrial production growth to remain at 5.7% y-o-y and fixed asset investment growth to edge down to 10.0% y-o-y (ytd)."
"We remain cautious on China’s near-term external outlook, expecting export growth to stay in negative territory in Q4, as there is still no sign of a rapid rebound in external demand."
"On the policy front, we maintain our call of a moderate fiscal stimulus from the central government. After the cuts to the RRR (50bp) and benchmark interest rates (25bp) on 24 October, we expect no more RRR or rates cuts this year, but expect four RRR cuts (50bp each) and two benchmark interest rate cuts (25bp each) in 2016."
"China’s October adjusted FX reserves unexpectedly rose by USD17.8bn m-o-m (Previous: -USD44.4bn), which was contrary to our and markets’ expectations given the People’s Bank of China (PBoC) was reportedly intervening to support RMB in October."