Expectations on China data to spur markets

A slew of Chinese macroeconomic data kicks off today. These will be the first real market leads from Asia in a while after a relatively quiet stretch last week.

China trade zone
Source: Bloomberg

Chinese stocks were up yesterday, in line with the rest of the region, as investors’ confidence returned.

This followed a few weeks of overhanging negativity from concerns over a slowing European economy, Ebola jitters, and uncertainty over US interest rate hikes.

The markets also got a boost from reports over the weekend that China’s central bank was planning to inject over $32 billion into regional and national banks to help bolster their liquidity.

This saw industrial metal prices edge up, especially aluminium which rose over 3% on Monday.

GDP a win-win?

China’s Q3 GDP will be first off the blocks at 10am (SGT), which will give some guidance over how much we should be worrying about its economy slowing down. The market consensus forecast is for GDP to rise 7.2% year-on-year, slightly lower than Q2’s 7.5%.

This will be interesting to watch as a disappointing print could spur investors to bet on further stimulus measures. If the print comes in better than expected, it could also lend a further shot in the arm for equities to sustain their rebound.

Other data being released at the same time will be September’s industrial production, fixed asset investment and retail sales. The market is expecting industrial production to rebound to 7.5% year-on-year, after falling 6.9% last month.

Another set of data will be out on Thursday, where we will get the HSBC China Manufacturing flash PMI for October at 9.45am (SGT). The market consensus forecast is for the reading to come in flat at 50.2.

What may be more interesting to watch out for will be the property price gauge on Friday at 9.30am (SGT) in the form of the Housing Price Index for September. We’ve seen the index gradually slide from over 9% at the beginning of the year to 0.5% in the latest August reading. Has the index already hit bottom, or will we actually see it fall into negative territory?

With the property price reading coming at the end of the week, any weak readings could potentially prompt investors to rein in their optimism and prompt a bout of profit taking.

The potential trades to watch around China data this week will be the China A50, Chinese H-Shares, Hong Kong HS50, AUD/USD, industrial metal prices and mining stocks such as Fortescue.

Ahead of the Hong Kong open

In  focus today will be the talks between pro-democracy protestors in Hong Kong and its government. The session is scheduled to be televised and will be closely watched for any indication of a resolution or if tensions will escalate again.

With the talks in the backdrop, we could see some cautions in the markets, which will put a lid on any gains today. On that basis, we are calling for the Hong Kong HS50 to open 0.24% higher, at 23,080 points.  However, some strong China data releases today could help push up the index further.

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