The Week In Hindsight, 12 May 2014
The Shanghai Composite Index made a positive start to the week as traders shrugged off a minor slowdown in Manufacturing ahead of the release of Trade Balance data on Thursday (CNY time) which highlighted an increase in exports over the course of April.
This was as the Chinese trade surplus recorded an above expectations increase from $15.2 billion to $18.5 billion, providing a boost for indices and hope among equity traders that the pace of growth may be holding up firmer than some had previously anticipated.
After repeated challenges toward the upside, the SSE Index eventually closed the week fractionally lower as inflation data showed price pressures within the economy cooling to the lowest levels since late in 2012. CPI for the month of April came in at just 1.8% against expectations for a read of 2.1%, reigniting concerns over the economy.
This lead the Chinese President Ji Xingping to release a statement, via Xinhua news agency, over the weekend where he detailed the need for economy watchers to adjust to the “new normal” as China heads toward its slowest year of economic expansion since 1990.
In line with the unchanged outlook for the CNY economy, our view related to opportunities in China also remains unchanged. This is that, given the uncertainty surrounding risks within the financial system and future sentiment toward both equities as well as growth; we continue to believe that price action in China is best observed from a safe distance.