Chinese trade surplus rises on higher exports, SSE Index extends rally

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Chinese Economic Update – 08 September 2014

Chinese trade  surplus rises on higher exports, SSE Index extends rally

Chinese equities continued to advance last week as manufacturing PMI’s from both HSBC and China’s Federation for Logistics and Purchasing each confirmed that activity in the sector held firmly at levels consistent with expansion during August.

In addition to manufacturing data, releases covering non manufacturing industries as well as the services sector all pointed toward stable levels of economic activity throughout the previous month.

With stronger than expected data also emerging from the US during the week, there has been little reason for Chinese investors to stem the flow of new money into local markets; even after what is now five consecutive weeks of above trend gains.

Looking to the current week, trade balance data released on Monday morning appears to have set the foundations for another week of elevated levels in CNY equities, with the monthly measure of the balance between imports and exports revealing a surge in overseas demand for Chinese goods during August.

Going forward we expect that positive sentiment derived from a nascent period of stability for the Chinese economy, combined with positive economic data from some of the other leading global economies, should serve to underpin a healthy appetite for Chinese shares.

While we continue to hold concerns regarding the long term credit outlook for China, in addition to accepting the suggestion of many industry counterparts that the economy may be vulnerable to slowing again later in the year; we do not anticipate a sudden reversal in the sentiment which has driven the nation’s benchmark equity indices to the gains of recent weeks.

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