China’s economy slows again


The nation grapples with structural downward pressure at home
Newsfeed17 Sep 2019
Photo credit: AFP Photo


Market news selected by the DBS Chief Investment Office

MAINLAND CHINA & HONG KONG

China’s slowdown is deepening just as risks for the global economy mount, piling pressure on the authorities to do more to support growth.

Industrial output rose 4.4% from a year earlier in August, the lowest for a single month since 2002, while retail sales came in below expectations. Fixed asset investment slowed to 5.5% in the first eight months, with the private sector lagging state investment for the sixth month.

The data add support to the argument that policymakers’ efforts to brake the slowing economy are not sufficient as the nation grapples with structural downward pressure at home, the risk of yet higher tariffs on exports to the US and now surging oil prices.

The Shanghai Composite Index swung between gains and losses before closing slightly lower. Futures contracts on China’s 10-year government bond regained losses after the data release to close at 0.07% higher on Monday (16 September).

The slowdown in output was almost across the board, with food processing and general equipment manufacturing unchanged from last year. Car output rose after declining for four months. Growth in sales of consumer goods slowed to 7.2%, the lowest since April this year, but there was an increase in food sales. The unemployment rate fell to 5.2% from 5.3% in July, within the narrow band it has occupied all year even amid the slowdown. – Bloomberg News.

The Shanghai Composite Index fell 0.02% to 3,030.75 on Monday (16 September) and the Hang Seng Index lost 0.83% to 27,124.55.

 

REST OF ASIA

Global investors are starting to fall out of love with India’s Prime Minister Narendra Modi.

After pouring USD45b into India’s stock market over the past six years on hopes that Modi would unleash the country’s economic potential, international money managers are now unwinding those wagers at the fastest pace on record. They have sold USD4.5b of Indian shares since June, on course for the biggest quarterly exodus since at least 1999.

It is hard to fault investors for losing faith. India’s economic growth has decelerated for five straight quarters to the weakest level since early 2013, one year before Modi became prime minister. And the 5% headline number for the second quarter may understate how painful the slowdown has become. Car sales are sinking at the fastest pace on record, capital investment has plunged, the unemployment rate has surged to a 45-year-high and the nation’s banking system is hamstrung by the world’s worst bad loan ratio. Monday’s (16 September) oil-price spike adds yet another headwind for a country that imports most of its crude.

In recent weeks, the government has focused primarily on efforts to shore up short term growth as the US-China trade war weighs on emerging markets globally. Modi’s administration on 14 September unveiled at least USD7b of tax breaks for exporters, adding to measures last month that included tax benefits for vehicle purchases, the rollback of an extra levy on capital gains earned by international funds, and an easing of foreign investment rules in sectors including retail, manufacturing, and coal mining. – Bloomberg News.

Australia’s S&P/ASX 200 Index traded 0.29% lower to 6,653.80 at the open on Tuesday (17 September). It gained 0.06% to 6,673.48 the previous session.

South Korea’s Kospi Index erased 0.25% to 2,057.02 on early-Tuesday. It added 0.64% to 2,062.22 the previous session.

The Taiwan Stock Exchange Weighted Index (Taiex) climbed 0.65% to 10,898.13.


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