Far from the market expectation few weeks ago, the industrial output in China expanded 6.3 percent for the month of August. The data was released during the early session on Tuesday while the market participants were gauging the trend of the Chinese equities.
Unexpected Climb
According to the data released by the National Bureau of Statistics, the industrial output climbed 6.3 percent in August on an annual basis, higher than in July and for the same month in 2015. The industrial output serves as the indicator to gauge the output of Chinese companies with annual main business revenue of above 20 million yuan.
Further, the private sector investment was still steady with 2.1 percent, while the state-backed investment increased by 21.4 percent. For the last eight months, the property investment advanced 5.4 percent, comparatively higher than the 5.3 percent jump from January to July.
As China seeks for firmer economic recovery, the recent data provided a support to the notion that it is already getting close to the target of rebalancing the market. For the last few months, a collective effort to lift the consumer spending and development in housing and infrastructure have been made. Today’s figures marked the biggest and fastest increase in output for the last five months.
China Stocks Plummet
On the other hand, not all was impressed by the strong numbers. During the morning session, investors were still uptight as Chinese stocks changed hands lower. The Shanghai Composite Index dropped 0.2 percent, while the CSI300 index declined 0.2 percent.
Apparently, market players have been too anxious in the series of market events and news. Started by the hawkish comments from the Fed and then followed by mixed signals regarding the rate hike. It was not surprising that the investors still wait for further data and signals before acting.
Economists Julian Evans-Pritchard explained that “The delayed impact of earlier policy easing means that a stronger second-half of this year is likely. Admittedly, with further monetary easing unlikely in the near term, this uptick in economic activity is likely to fizzle out going into next year.”
Meanwhile, as the equities in China plummeted, the stocks in Hong Kong Index bounced back supported by the fragile and liquidity driven mainland money inflows in the past few weeks. Unlike in China, all the major sectors in Hong Kong traded higher, headed by the significant gains in the I.T. division.
Conclusion
Despite the positive figures, the doubtful market experts still couldn’t see the positive tone after the report. Well, that’s an honest response since the trust of the people nowadays with the government was not as strong as it is used to be. Can you blame the general public if they don’t rely much on the information provided by the government when you couldn’t see any improvement at all? The problems lie with the consistency of the forecasts and reports released regarding the real economic status of a certain country.
In the meantime, investors will be extra careful. Oil prices have been volatile due to the uncertainties of the plans of the major oil producers. The U.S. central bank has never been this indecisive. And when it comes to China, what’s real anyway? The whole word is still haunted by slow economic growth, from east to west. However, a strong trade data, stable inflation and appreciation of currency plus this type of data surely mean something.