China unlikely to hit asset markets — ‘for now’

Published on: January 18, 2018
Author: Hans Stone

As long as Beijing reaches growth targets, base metals will outperform precious metals

Despite the controversy over fake Chinese economic figures, Thursday’s monthly “data dump” out of Beijing will be closely watched for the impact it could have on asset markets.

Consensus says China’s fourth-quarter GDP growth will dip year on year to 6.7 per cent from 6.8 per cent, with the focus on the government’s attempts to sacrifice some expansion in a bid to crack down on pollution.

China last year “ceased to be perceived as a threat to global growth and markets”, according to Diana Choyleva at Enodo Economics, but with the power games of the 19th Party Congress out of the way, investors have become “more worried about a China slowdown and its negative impact on risk assets”.

But they should relax — “for now” — she argues, because Chinese growth is likely to surprise on the upside at least in the first half of 2018. After that, though, “storm clouds” could gather in the form of tighter domestic policy responding to overheating worries.

As long as China hits growth targets, Edison analysts expect base metals to continue to outperform precious metals. Beijing’s curbs on dirty coal led to a tripling of the coking coal price and strength in the iron ore price.

Copper’s 33 per cent price jump last year shows the market is focused on global demand growth outpacing slowing supply. But Liberum’s Ben Davis cautions that Dr Copper’s check-up shows conflicting symptoms, with a bevy of indicators pointing to weaker demand ahead.

Source: FT.com

 

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