… although data disappointments could stoke stimulus bets and thus bolster local equities, sometimes bad news is just bad news.
That’s what we said on the heels of uninspiring April activity data out of China on Wednesday. Retail sales and industrial output decelerated last month, suggesting March’s upbeat numbers may have been something of mirage as more than a few analysts warned.
And while bad news may just be plain old bad news on some days, Wednesday wasn’t one of those days for Chinese equities. Mainland shares surged nearly 2% following the poor data, helping to trim this month’s losses. Shares faltered on Monday as renewed trade concerns ensured there would be no follow-through from Friday’s state-sponsored rally. A-shares had their worst day in three years following Trump’s tariff escalation two Sundays ago.
Drilling down a bit into Wednesday’s action shows consumer stocks rallying, with Staples up handily. That likely has something to do with Kweichow Moutai rising more than 4.5% on the day.
The yuan was basically stable.
“April data showed softness beyond seasonal factors”, Barclays wrote Wednesday, in their postmortem. The bank’s Jian Chang continued, noting that “a decisive decline in manufacturing investment and continued weakness in infrastructure investment, as well as weak exports, underscore how risks to both our domestic demand and external demand forecast are tilting to the downside, even before taking into account the recent escalation of the tariff war.”
That assessment underscores the main takeaway from the data which is simply that while the numbers aren’t inspiring, the timing is particularly bad, given that the April prints suggest the economy was already slowing prior to Trump’s latest escalation.
That said, Barclays’ take wasn’t all doom and gloom. “In view of the distortions, we prefer not to over-interpret single-month (April) volatility and forecast May IP, retail sales and FAI to improve from April’s lows”, the bank went on to say. Their base case “expects growth momentum to moderate gradually… reflect[ing] fading credit and monetary stimulus and moderating external demand, which we expect to be partly offset by better consumption and investment growth as fiscal stimulus unfolds.”
For now, trade concerns will continue to dominate the narrative. Here’s a handy timeline:
(Barclays)
One person who isn’t enamored at all with the April activity data is Krung Thai Bank Chief Strategist Jitipol Puksamatanan.
“[The numbers] are literally bad”, Jitipol said Wednesday, adding that he “really fears that the market does not realize that the effect of the trade war to global trade and the Asian economy is yet to come.”
Womp, womp.
