Export slow, pointing to rising deflation pressure
While manufacturing PMI indicated improvement in demand, China’s trade data depicted a great picture. Below 7.2% in July, exports in August 4.4% yoy increased, marked sharp losses in speed and indicated to weaken external demand. In particular, Chinese shipment for the US declined by 33%.
Weakening the external demand can speed up competition. Increased competition can fuel the price wars to save cost to consumers.
An American-China trade agreement with low or deleted tariffs can change the story. Given the new trade routes of China, the increase in US demand for Chinese goods may refuse inflation pressure. However, the US-China friction and higher American Levis can run the pressure of deflation directly on Chinese shipments and transpirations.
Market Outlook: Beijing Stimulation and Lump Data
While China’s inflation, PMI, and export data will affect the spirit, Beijing’s stimulation pledge may reduce the impact of weak numbers. Policy measures targeting housing markets, unemployment and domestic consumption can increase demand.
Meanwhile, the upcoming Chinese economic data will provide further insight into traders and Beijing in the atmosphere of demand. Retail sales, industrial production and unemployment figures for August will face investigation on Monday, September 15. Weak data can put pressure on Beijing to roll fresh stimulation before this month’s Polit Bureau meeting.
The expectations of further stimuli affect the impact of CPI and PPI data on the mainland China and Hong Kong equity markets.
The Hang Seng index increased by 0.60% to 26,094 in the morning trading after killing the initial high of 26,129. Meanwhile, the mainland CSI 300 of China increased by 0.05%, while the Shanghai Composite Index slipped 0.02%.
