Chinese Economic Update – 09 December 2014

Chinese trade balance slips as world awaits inflation and industrial production data; SSE Comp tops 3,000

Chinese shares continued their unprecedented advance throughout much of the time since our last update, with the SSE Composite index topping the 3,000 barrier for the first time since 2010 on Monday morning.

While the index appeared to top out for the time being on Tuesday morning, ahead of a 200 point correction, the rally seen over the last six months and its consequent breach above 3,000 has now brought year to date returns for the index to a noteworthy 34.99%.

There are several factors which have supported the index’s advance throughout the year, although the most notable of which are the easing of restrictions on international ownership of Chinese shares combined with what could be the beginning of an extended cycle of loosening monetary policy.

On the economic data front Chinese trade balance data highlighted a rising trade surplus, mostly as a result of lower than expected imports for the month. Exports also grew at a healthy pace of 4.7% on an annualised basis although, this was lower than the anticipated 7.9%.

In this regard we note, just as others have, that Chinese imports and exports are reported and in many cases transacted in dollars, thus; there are currency effects at play in the most recent numbers.

For example, the October – November rally of the US dollar will have led to a lower value of imports from the euro-zone as it requires less dollars to purchase a set number of euros, implying that import volumes were likely more resilient than the top line figures suggest.

Looking to the remainder of the week CPI inflation and industrial production figures are set to take centre stage as the headline acts for the Chinese economy. While official projections indicate expectations of little change from the previous month, the actual numbers should provide an insight into the general state of the economy during November.

SSE Composite Index // 10 Minute Intervals

SSEINDEX08DECE

 

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