Asian markets have shown signs of dullness after a hefty week of gains. Traders have somewhat failed to show their enthusiasm towards another set of stunning economic data released from China. It appears that they have failed to acknowledge that the Chinese GDP number has matched the forecast of 6.7% and instead have paid more attention to the previous reading of 6.8%.
Traders have been kept on their toes with concern about whether or not the People’s Bank of China (PCOB) had enough firepower and a rigorous plan to deal with China’s woes. The rout in the equity market which we experienced at the start of this year occurred because traders believed that the Chinese economy would become more depressed if the US increased its rates.
The Chinese GDP data which we have received today has confirmed that China is not heading for a soft landing and investors probably should have had some sort of belief in the government’s efforts. The GDP data was very much in line with the expectations which is an encouraging sign and to some extent it shows that we may be in for a bottom. A stronger argument for reaching the bottom can be made by looking at the industrial production number which surpassed the forecast of 5.9% with a reading of 6.9%.
What we also know from earlier this week is that the Chinese trade balance number has shown encouraging signs as the country’s exports have started to respond to stimulus strategies. So what does this all mean? It confirms that the PBOC is on the correct path and they have the right tools to fine tune the economy. The strategies which they have employed are beginning to bear fruit. Today’s GDP number certainly confirms more confidence in Chinese recovery and if things continue at this pace, it may be just a matter of time before we see a V-shape recovery.
by Naeem Aslam