Global markets on tenterhooks awaiting China data

AFP, SHANGHAI: Global stock markets will be on edge this coming week as China announces a slew of data investors will comb for clues about slowing growth in the world’s second-largest economy.
The government is scheduled to release monthly trade and inflation figures, as well as industrial output, fixed-asset investment and retail sales in the coming days. An official Chinese manufacturing survey last week sent world markets into a tailspin, as investors gave vent to worries China’s economy is headed for a “hard landing”. Although analysts cautioned not to read too much into the monthly release of the Purchasing Managers’ Index (PMI), Chinese growth is clearly slowing and more weak data could be an excuse to sell.
“There is a risk (of overreaction) because investors’ confidence level is at a very fragile stage. Any data that’s not on the good side, investors will react more than they should,” Jackson Wong, associate director at Simsen International Financial Group in Hong Kong, told AFP. China’s economy expanded 7.0 per cent in each of the first two quarters, slowing from 7.4 per cent growth last year, which was its weakest since 1990.
But investors were alarmed by authorities’ surprise lowering of the yuan currency’s central rate against the US dollar by nearly five per cent in a single week last month.  In a bid for more sustainable growth, Chinese policymakers are seeking a tectonic shift to domestic consumption and away from state-led investment.
“Pessimism over China’s short-term outlook is overdone and a growth pick-up in the second half is already in the pipeline,” ratings agency Fitch said in a report Friday.
“But expectations for the economy’s growth potential in the medium term are shifting lower as the scale of the restructuring challenge becomes clearer.”
ANZ Banking Group forecasts China’s gross domestic product (GDP) growth will slump to an annual 6.4 per cent in the third quarter, before rebounding to 6.8 per cent in the October to December period—but still below the government’s full-year goal of around 7.0 per cent.
“Further aggressive monetary easing and proactive fiscal policy, along with financial liberalisation, are needed to maintain GDP growth” at the official target, it said in a research report. China last month reduced interest rates and cut the amount of money banks must hold in reserve to try to bolster its economy and end the country’s worst stock market rout in almost two decades.
Japanese bank Nomura is forecasting “weak” trade data for August with exports falling 7.0 per cent year-on-year and imports dropping 10 per cent. Consumer price inflation could tick up to 1.8 per cent for the month on higher pork prices, though the threat of deflation remains, it said.
But many analysts expect China to avert a hard landing, even though economic growth will definitely slow this year.
“China’s economy has certainly been weak this year and still faces further downward pressures, but we think fears of an economic hard landing due to stock market gyrations are exaggerated,” UBS economists Donna Kwok and Wang Tao said in a research report.

Global markets on tenterhooks awaiting China data

AFP, SHANGHAI: Global stock markets will be on edge this coming week as China announces a slew of data investors will comb for clues about slowing growth in the worlds second-largest economy. The government is scheduled to release monthly trade and inflation figures, as well as industrial output, fixed-asset investment and retail sales in the coming days. An official Chinese manufacturing survey last week sent world markets into a tailspin, as investors gave vent to worries Chinas economy is headed for a hard landing. Although analysts cautioned not to read too much into the monthly release of the Purchasing Managers Index (PMI), Chinese growth is clearly slowing and more weak data could be an excuse to sell. There is a risk (of overreaction) because investors confidence level is at a very fragile stage. Any data thats not on the good side, investors will react more than they should, Jackson Wong, associate director at Simsen International Financial Group in Hong Kong, told AFP. Chinas economy expanded 7.0 per cent in each of the first two quarters, slowing from 7.4 per cent growth last year, which was its weakest since 1990. But investors were alarmed by authorities surprise lowering of the yuan currencys central rate against the US dollar by nearly five per cent in a single week last month. In a bid for more sustainable growth, Chinese policymakers are seeking a tectonic shift to domestic consumption and away from state-led investment. Pessimism over Chinas short-term outlook is overdone and a growth pick-up in the second half is already in the pipeline, ratings agency Fitch said in a report Friday. But expectations for the economys growth potential in the medium term are shifting lower as the scale of the restructuring challenge becomes clearer. ANZ Banking Group forecasts Chinas gross domestic product (GDP) growth will slump to an annual 6.4 per cent in the third quarter, before rebounding to 6.8 per cent in the October to December periodbut still below the governments full-year goal of around 7.0 per cent. Further aggressive monetary easing and proactive fiscal policy, along with financial liberalisation, are needed to maintain GDP growth at the official target, it said in a research report. China last month reduced interest rates and cut the amount of money banks must hold in reserve to try to bolster its economy and end the countrys worst stock market rout in almost two decades. Japanese bank Nomura is forecasting weak trade data for August with exports falling 7.0 per cent year-on-year and imports dropping 10 per cent. Consumer price inflation could tick up to 1.8 per cent for the month on higher pork prices, though the threat of deflation remains, it said. But many analysts expect China to avert a hard landing, even though economic growth will definitely slow this year. Chinas economy has certainly been weak this year and still faces further downward pressures, but we think fears of an economic hard landing due to stock market gyrations are exaggerated, UBS economists Donna Kwok and Wang Tao said in a research report.