Next Week in China: 16-20 September 2024
Major Data Releases:
- 16 September: Hong Kong to report July Volume and Price Statistics of External Merchandise Trade
- 16 September: Hong Kong to report Q2 Gross National Income and external primary income flows
- 19 September: Hong Kong to report June to August Unemployment and underemployment statistics
- 20 September: China to report September 1-year loan prime rate (LPR)
- 20 September: China to report September 5-year LPR
- 20 September: Hong Kong to report August CPI
- 20 September: Hong Kong to report Q2 Chain Volume Measures of GDP
- 20 September: Hong Kong to report Q2 Balance of Payments and International Investment Position statistics
- 20 September: Macau to report August CPI
- 23 September: Taiwan to report August employment statistics
Next week in September will be the Mid-Autumn Festival in China. Monday and Tuesday are public holidays, and the market will be closed. Therefore, only loan prime rates – which serve as the benchmark for pricing corporate and retail loans – are the only major economic data expected from mainland China.
Coming to the LPR, we expect the September figures (1-year LPR at 3.45 per cent and the 5-year LPR of 3.85 per cent) to remain at the same level as in August. There is still some scope for a slight reduction in the LPR quotes within the year, aiming to stimulate demand for essential housing needs, but there are currently two obstacles:
- The two significant adjustments to the LPR in the first half of the year have led to mortgage rates and financing costs for the real economy reaching record lows, and the effects are still being realized;
- Banks are facing considerable pressure from narrowed net interest margins and operational challenges.
According to data released by the National Financial Regulatory Administration, the net interest margin of commercial banks was 1.54 per cent in the second quarter of 2024. It was at 1.74 per cent a year prior. Considering all the above factors, we hold a neutral view on the September LPR.
This week, A-share indices generally declined, with both growth and dividend styles experiencing downturns. As of Thursday, September 12, the MSCI China Index had risen by 0.49 per cent, the Shanghai Composite Index had decreased by 1.76 per cent, the Shenzhen Component Index had fallen by 0.94 per cent, and the ChiNext Index had increased by 0.89 per cent.
Hainan concept stocks have surged after the Chinese government announced tariff exemptions for pharmaceuticals and medical devices imported through the Hainan Free Trade Port. Multiple stocks, including Kangzhi Pharmaceutical, Hainan Haiyao, and Hainan Development Holdings, reached their daily limit.
Looking ahead, the Chinese stock market is showing signs of bottoming out after tumbling for most of the year, but market players await more positive cues for confidence to be restored. Internal demand remains weak, as suggested by below-50 manufacturing Purchasing Managers’ Index monthly readings, while high-frequency real estate data continues to decline month-on-month.
This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.
