Next Week in China: 25-29 November 2024
Major Data Releases:
- 26 November: Hong Kong to report October external merchandise trade data
- 26 November: Macau to report October external merchandise trade data
- 27 November: China to report profit of industrial firms above designated size for October
- 29 November: Hong Kong to report October retail sales figure
- 30 November: China’s National Bureau of Statistics to report November Purchasing Managers’ Index (PMI)
Next week is expected to be relatively quiet regarding releases of major economic data. The manufacturing PMI figure for November will be released by the Chinese government at the end of the month, followed by the Caixin PMI that is part of the global S&P metrics, which will be published in early December.
Despite a year-on-year decline in the profit of large industrial enterprises for September, we anticipate a recovery in October. From January to September, the total profit of these large companies nationwide reached RMB 52.28 trillion. However, due to insufficient demand, declining product prices, and a significantly higher comparative base from August, profits decreased by 3.5 per cent year-on-year as of end-September. On a positive note, the high-tech manufacturing sector has demonstrated resilience with profits rising by 6.3 per cent year-on-year, which is 9.8 percentage points above the average earnings growth of large firms. This growth contributed to a 1.1 percentage point boost in profit growth for these enterprises, providing significant boost for overall profitability.
Regarding the PMI, we anticipate that the November figure will continue to remain in expansionary territory. According to data released by the National Bureau of Statistics, the PMI in October was 50.1, up 0.3 percentage points from the previous month and indicating a return to the above-50 expansionary threshold. This rise defies typical seasonal trends, suggesting a stronger-than-expected economic recovery. From 2017 to 2023, the PMI in October has typically declined. However, the strength of the October 2024 PMI overcame these patterns, exceeding the average seasonal level from the past five years by 1.3 percentage points. This increase was mainly driven by recent counter-cyclical policy efforts to lift domestic demand. Looking ahead, a key challenge will be flagged through the New Export Orders Index given the potential re-introduction of high tariff policies under a second Trump presidency.
As of Thursday, 21 November, the MSCI China Index increased by 0.66 per cent for the week. The Shanghai Composite Index rose by 1.19 per cent, the Shenzhen Component Index by 0.66 per cent, and the ChiNext Index by 0.99 per cent. Small-cap stocks outperformed mid-cap and large-cap stocks this week while growth stocks outpaced value stocks. Expected policy and liquidity support, along with increased risk appetite, suggest that the technology sector is likely to maintain its growth potential, there is a threat of rising uncertainty regarding external demand. Therefore, expanding domestic demand remains key to stabilizing China’s growth going forward.
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.
