There are some signs that Chinese economic deterioration has bottomed out - lending growth has accelerated, the pace of deterioration in the manufacturing sector, has slowed (though it remains in contraction) credit extension is at record levels (multiplying the effects of the government stimulus). However, this increased activity may only partly offset the weakness of the export sector and residential investment even as consumption is slowing . Nevertheless a reduction in the pace of deterioration is a good sign
Danske: The development in the PMIs suggest we should soon see a stabilisation in both industrial production, where some stabilisation is already evident and exports, where early foreign trade figures for other Asian countries suggest trade is still contracting in early 2009. The development is in line with other recent data (credit growth) indicating that the Chinese economy at least is recovering
Wang: ,Growth will accelerate from the current pace to 7.2% for 2009 with consumption contributing 4.4pp and investment 4pp and the collapse in exports slicing off 1.2pp.
Pettis: the sudden surge in lending in December put back on balance sheet loans that were taken off in 2007 and 2008. Chinese capex reliance on retained earnings will limit investment pickup - suggests China will not avoid the hard adjustment it faces ahead
Citi: Further downside risks are possible if the macro condition worsens, but China's valuations seem to be bottoming from an ROE perspective, current 2009 P/B of 2.1x for 18% 2009 ROE looks more appealing than a 2008 P/B of 5.0x for 21% ROE in January 2008.
Setser: available trade data still seems negative for China. eg Korea’s exports to China have been falling faster than Korea’s overall exports, suggesting China's export contraction continued
Dollar: Industrial growth declined sharply, but primary sectors grew at 7.3% in the 4th quarter, and services at 8.0%, perhaps indicating the beginning of rebalancing in which the service sectors become the growth leaders. the Chinese consumer is a bright spot in an otherwise gloomy global picture and the right govt policies (support of heath, education etc) could cushion consumption
Although exports make up less than 20% of GDP, a considerable amount of investment is targeted towards this sector, meaning that the still weak external demand might limit Chinese recovery, especially if consumption also weakens - furthermore, manufacturing deterioration may have stopped but the sector continues to contract and with lack of profits to finance investment and weak outlook for external and domestic demand in many sectors, investment may be limited
Loss of jobs, reduction in incomes will depress consumption in urban areas.
MS: lending rates may not be sustainable given that most is bill financing
Although the 14% bump in retail sales year on year seems high, it is considerably lower than the monthly y/y gains sustained in recent months and ignores the fact that last years lunar new year sales were distorted by devastating storms.
Feb 14, 2009
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