Chinese growth shows signs of losing momentum

Monday, January 20, 2014

Chinese growth during the last quarter of 2013 began to show signs of losing momentum as Beijing’s attempts to promote an austerity drive and crackdown on overcapacity crimped industrial output, retail sales and GDP. Industrial production growth in December slowed to 9.7% from 10% the previous month while retail sales growth was marginally lower at 13.6% in December from 13.7% the previous month. Fourth quarter GDP growth slowed to 7.7% y/y which was slightly better than the 7.6% median forecast compiled by Bloomberg but softer than the 7.8% y/y growth for Q3 2013. The slowdown in investment spending as well as the recent credit crunch which spiked overnight repo rates outlines concerns that Beijing may be pushing reforms too quickly with many analysts and economists holding the view that growth may slow further this year. Chinese equity markets drifted lower immediately after the announcements, with the Shanghai Composite closing below 2,000 for the first time since July last year as it lost 0.68% throughout the session while the CSI 300 closed 0.57% lower. Wider Asian markets also slumped on the data releases with the Nikkei and TOPIX closing down 0.59% and 0.27% respectively while the Hang Seng erased 0.81% off its value throughout the session.

Gold prices rose to a six week high on healthy physical demand which supported the yellow metal to a close above $1,250 on Friday. Stronger demand from Asia supported the move higher as prices built on the 50 day MA, with early trade this morning testing resistance towards $1,260. Holding in the SPDR Gold Trust ETF increased by 7.5 tonnes on Friday as total holdings rose 0.95%.

Concerns in Thailand continue to mount as protests against the government compound emerging market capital flight from large scale investors. The recent unrest has prompted many institutional investors to sell their holdings in bonds and stocks as a resolution between the incumbent government and the demonstrators looks far off. The baht has softened considerably against the dollar, pushing past 33.00 at the beginning of the year before pulling back towards 32.70 towards the end of last week as prices corrected on a wave of consolidation. 

Chinese Q4 2013 GDP growth momentum slows slightly y/y;

CNGDPYOY Index China GDP Consta 2014 01 20 07 45 22

Shanghai Composite closes below 2,000 for the first time since July

SHCOMP Index Shanghai Stock Exc 2014 01 20 07 48 05

Gold prices and inflows into SPDR Gold Trust rise on physical demand

GDTRGOLD Index SPDR Gold Trust 2014 01 20 07 58 07

Baht pushes below 33.00 on consolidation but remains weak against the dollar

THB Curncy Thai Baht Spot Dai 2014 01 20 07 33 22


Events for today: Monday, 20 January 2014

US Market Holiday

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CN

Q4

GDP

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CN

Dec

Retail Sales

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CN

Dec

Industrial Output

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CN

Dec

Urban Investment

View Economic Market Calendar

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