Source: CNBC
Judging by the reaction of financial markets, traders seem encouraged by the recent round of Chinese economic data, from gross domestic product and exports to industrial production and retail sales.
But those traders may be leaping to conclusions.
Judging by the reaction of financial markets, traders seem encouraged by the recent round of Chinese economic data, from gross domestic product and exports to industrial production and retail sales.
But those traders may be leaping to conclusions.
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"In the short term, it reinforces what we've been trying to get investors to listen to — China
is not headed for a hard landing. Retail sales witnessing double-digit
growth. Housing market looks like it is stabilizing ... indicating that
the stimulus put in place by the central bank is starting to work," said
Sameer Samana, global quantitative strategist at Wells Fargo Investment
Institute.
But Wall Street veterans including Samana caution that investors should not buy into the idea of a Chinese recovery too quickly — turnarounds take time. At least three to four months of consistently good numbers representing a gradual rebound in China's industrial and services sectors will be needed before any seasoned economist will be able to label China as a "turnaround story."
But Wall Street veterans including Samana caution that investors should not buy into the idea of a Chinese recovery too quickly — turnarounds take time. At least three to four months of consistently good numbers representing a gradual rebound in China's industrial and services sectors will be needed before any seasoned economist will be able to label China as a "turnaround story."
"With every statistic we see out of Asia, ex-China, whether it's Taiwan, whether it's Hong Kong and other Asian countries, they're suffering slowdowns from their sensitivity and exposure to China."
Moreover, the earnings of major Chinese
corporations would also need to illustrate a rebound in profit and sales
growth. According to Shanghai-based financial data firm Wind
Information, steel, industrial and energy companies in 2015 posted a 45
percent or greater drop in net profits on average. That's definitely not
an encouraging sign, experts say, given how actively the central bank
was injecting liquidity into the economy.
Analysts point to something else, as well: Neighboring trading partners of China continue to post dismal numbers, suggesting that the improvement in China's March data may not be accurate.
South Korea reported a double-digit decline in first-quarter exports. Taiwan posted weaker-than-expected March trade data earlier this week, with exports plunging 11.4 percent and imports dropping 17 percent year over year. Growth in Hong Kong's manufacturing sector came in at its lowest level since August. And Japan's latest Tankan Survey indicated further deterioration in business activity and confidence.
Analysts point to something else, as well: Neighboring trading partners of China continue to post dismal numbers, suggesting that the improvement in China's March data may not be accurate.
South Korea reported a double-digit decline in first-quarter exports. Taiwan posted weaker-than-expected March trade data earlier this week, with exports plunging 11.4 percent and imports dropping 17 percent year over year. Growth in Hong Kong's manufacturing sector came in at its lowest level since August. And Japan's latest Tankan Survey indicated further deterioration in business activity and confidence.
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