Next Week in China: 7-11 October 2024

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Major Data Releases:

  • 07 October: China to report September foreign exchange reserves
  • 07 October: China to report September gold reserves
  • 08 October: Taiwan to report September consumer price index (CPI)
  • 08 October: Taiwan to report September producer price index (PPI)
  • 10 October: China to report September M0, M1, and M2 money supply levels
  • 10 October: China to report September Total Social Financing (TSF)
  • 10 October: China to report September new RMB loans
  • 13 October: China to report September CPI
  • 13 October: China to report September PPI

Next week, there will be significant data releases that include seven economic reports from mainland China. The markets in mainland China will remain closed on Monday due to the National Day holiday and will reopen on Tuesday.

Regarding the CPI and PPI, the “scissors gap” between them, or the difference between producer and consumer prices, continued to widen in August. The CPI increased by 0.6 per cent year-over-year, with the growth rate picking up by 0.1 percentage points from the previous month. In contrast, the PPI decreased by 1.8 per cent year-over-year, a faster decline worth a full percentage point compared to July. We expect this trend to persist in September, with the PPI slightly decreasing and the CPI slightly increasing.

Regarding money and finance statistics, the growth rate for the TSF, a broader measure of liquidity, slightly declined in August, with the overall amount and structure of credit being suboptimal. The growth rate of M1 unexpectedly dropped to -7.3 per cent, marking the fifth consecutive month of year-over-year decline and setting a new historical low. The “scissors gap” between M1 and M2 widened to 13.6 per cent, indicating insufficient effective demand in the real economy. In terms of the structure of new social financing, the acceleration of government bond issuances provided the main support this month. The issuance of corporate bonds has decreased year-over-year, reflecting generally weak market confidence. However, we are optimistic about the future financial environment given the announcement of the unexpectedly large stimulus last 24 September.

The onshore market has been closed since Tuesday this week. However, on Monday, the Shanghai Composite Index increased by 8.06 per cent, the Shenzhen Component Index rose by 10.67 per cent, and the ChiNext Index went up by 15.36 per cent from last week’s closing level. As of Thursday, October 3, the MSCI China index rose by 8.73 per cent for the week, albeit declining from Wednesday’s level. The boost from China’s stimulus program also lifted the performance of Lundgreen’s Invest – China Fund, as seen below.

NWIC - 04Oct24 - Graph

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.

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