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13 Jan 2016
China trade is welcome news; expect steady 6.9% Q4 GDP next week - TDS
FXStreet (Delhi) – Annette Beacher, Chief Asia-Pac Macro Strategist at TD Securities, suggests that China trade for December pleased the markets with the CNY version showing a surprise bump in exports (+2.3%, mkt - 4.1%) and a lesser fall in imports than expected (-4.0%, mkt -7.9%).
Key Quotes
“The outsized trade surplus of CNY 382b (or USD 60b) will go a long way to restore depleted reserves.
The underbelly of the trade report was mixed: (1) a seasonal spike in exports to HK inflated the result, although a pickup in exports to Europe hints at higher demand there; and (2) for Australia, imports of iron ore (volumes) reached a record high. Clearly the iron ore price slump is about excess supply, not shrinking demand, a theme we raised and revisited a few times last year.
Looking ahead to Tuesday January 19, Dec qtr GDP is widely tipped to remain at 6.9%/yr. While we agree, we see risks as slightly tilted to the upside. Growth skeptics will of course attach downside, but they haven’t caught up with the ongoing rotation of growth away from heavy industry and towards the services sector. This is quite apparent in the second chart. Comparing GDP with PMI patterns isn’t wholly reliable either, but with a steady official PMI and a pickup in the Caixin (compared with the dismal Q3 print) assuming ‘more of the same’ GDP growth seems the path of least resistance.
Market range 6.4% to 7.1%, median 6.9%, TD 6.9%. Risks? We see risks to the upside, with the bulk of the buoyant services industry still under-represented in the high-frequency indicator suite, we see the capacity to produce a better result on the day.”
Key Quotes
“The outsized trade surplus of CNY 382b (or USD 60b) will go a long way to restore depleted reserves.
The underbelly of the trade report was mixed: (1) a seasonal spike in exports to HK inflated the result, although a pickup in exports to Europe hints at higher demand there; and (2) for Australia, imports of iron ore (volumes) reached a record high. Clearly the iron ore price slump is about excess supply, not shrinking demand, a theme we raised and revisited a few times last year.
Looking ahead to Tuesday January 19, Dec qtr GDP is widely tipped to remain at 6.9%/yr. While we agree, we see risks as slightly tilted to the upside. Growth skeptics will of course attach downside, but they haven’t caught up with the ongoing rotation of growth away from heavy industry and towards the services sector. This is quite apparent in the second chart. Comparing GDP with PMI patterns isn’t wholly reliable either, but with a steady official PMI and a pickup in the Caixin (compared with the dismal Q3 print) assuming ‘more of the same’ GDP growth seems the path of least resistance.
Market range 6.4% to 7.1%, median 6.9%, TD 6.9%. Risks? We see risks to the upside, with the bulk of the buoyant services industry still under-represented in the high-frequency indicator suite, we see the capacity to produce a better result on the day.”