Wednesday, September 9, 2015

China: Growth concerns reincarnated – Nomura

FXStreet (Delhi) – Research Team at Nomura note that the concerns regarding the China’s growth story are rising once again, driven by the recent equity market sell-offs, capital outflows and disappointing economic data. This in turn is beginning to pressure asset markets again.

Key Quotes

“Many doubt the official 7% GDP growth number for H1 2015, while some even put current growth at 4% or below.

“In our view, the official data are largely reliable – if we exclude non-sustainable contributing factors to growth, the official data have indicated a significant slowdown of “true” growth to near 6%.”

“Due to the massive equity market rally (from Q4 2014) and high trading volumes, we estimate that the financial sector contributed an outsized 1.4 percentage points (pp) to the reported 7% y-o-y growth in H1, about 0.7pp more than usual. The near-6% y-o-y GDP growth is also consistent with monthly activity data, such as industrial production (IP, 6.3%), fixed asset investment (11.4%) and retails sales (10.4%) in H1.”

“For August, most high-frequency data improved, partly due to a low base last year, while in contrast, some leading indicators point to weaker signs. Overall, our verdict is that economic growth has yet to stabilise.”
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