Dec 14,2018 Economic Acumen Commentary by CEBI Research Team
China’s November economic indicators encountering softening trend
China's general economic indicators have shown downward trend of growth in November with which industrial production and retail sales grew at decelerating pace.
On 13 December 2018, Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, presided over a meeting of the committee's Political Bureau to discuss and study economic outlook of 2019.
China will continue to pursue supply-side structural reform, deepen market-oriented reform, expand opening up at a high level, and speed up the building of a modernized economy.
China will maintain economic growth at a reasonable and sustainable level to further stabilize employment, the financial market, foreign trade, foreign investment and domestic investment.
China economic fundamentals remain sound and economic activities will maintain a stable growth in 4Q2018 and 2019.
Dec 3,2018 Economic Acumen Commentary by CEBI Research Team
Halting the escalation of trade disputes for 90 days
G20 summit at Argentina this year was overwhelmingly shadowed by the working dinner between the leaders of the two largest economies over the trade disputes. The trade talk is gaining progress that the U.S. will leave the tariffs at 10% on $200 billion worth of imported Chinese products unchanged for 90 days while China agrees to buy substantial amount of agricultural, energy, industrial and other products to reduce the trade imbalance between the two countries.
In addition to temporary suspension of new tariffs, both sides have agreed to begin negotiation on resolving some of business issues in their economic relationship. Tariff rate raising from 10% to 25% remains intact if the trade agreement cannot be reached during 90-day negotiation period.
In sum, the tariffs' reprieve offered by the U.S. will only soften the negative impact of trade war on global economic growth in near term but the existing tariffs and possibility of unsuccessful trade deal still cloud the economic outlook of 2019.
Nov 28,2018 Economic Acumen Commentary by CEBI Research Team
Global equity markets encountering elevated volatilities
Entering 4Q2018, global equity markets drift lower as escalation of U.S.-China trade tensions, dollar strength, mounted geo-political risks and sharp drop of oil prices keep the bulls out of the market.
The plunge in the U.S market, especially the technology stocks sell-off, triggers hiking volatilities in equities across the globe and shakes investors' confidence over economic outlook. The pressure exerted by strong recovery of U.S. economy on the rest of the world via higher U.S. interest rates and stronger dollar have been elevated in the sense that emerging markets (EM) economies face a high risk of capital outflows and market volatility.
Upcoming G20 summit may help defuse US-China trade conflicts but it is unlikely to strike a trade deal for removal of all tariffs. In sum, investors have become more cautious about market outlook and volatile swings in the index are expected for the rest of 2018 and 2019.
Nov 19,2018 Economic Acumen Commentary by CEBI Research Team
Hong Kong’s economic activities embedded into slow-motion growth during 3Q2018
Echoing global headwinds in the form of on-going trade disputes, interest rate hikes, decelerating global growth momentum and escalation of geo-political risks, Hong Kong's (HK) economy is seen to face easing of economic activities, posting a lower-than-expected GDP growth of 2.9% YoY during 3Q2018.
Consumption, the major driver of economic growth, demonstrated slowing growth momentum at 5.2% YoY, lower than 1H2018's 7.4%. The deceleration was mainly due to fading asset price-driven wealth effect both from correction of stock market and property market as well as depreciation of renminbi undermining the spending power of mainland tourists.
In sum, trade conflicts between the U.S. and China will continue to soften global growth of trade in goods and services, thus weakening the growth momentum of HK's trading and financial activities in coming quarters.
After experiencing a strong economic performance in 2017 and the first half of 2018, we believe HK economy will ease up more in 4Q2018 and 2019.
Nov 14,2018 Economic Acumen Commentary by CEBI Research Team
Mixed trend of China’s October economic indicators in sight
With heightened global economic and political risks weighing on economic outlook, China's economic indicators have shown mixed trend of growth in October with which fixed asset investment (FAI) and industrial production rebounded slightly while retail sales grew at a decelerating pace.
Looking forward, tight trade tensions, mounting geo-political risks, tightening stance of the U.S. monetary policy and dollar strength are the major threats to China's economy in coming months-.
In order to resist the headwinds, China policymakers have stepped up efforts to launch intensive policy measures to ensure soft-landing of the economy.
Domestic demand acts as the key growth driver of the economy in which consumer spending and fixed asset investment will contribute more to GDP growth in coming quarters. We believe the overall macroeconomic conditions of China remain stable in 4Q2018.
Nov 9,2018 Economic Acumen Commentary by CEBI Research Team
The Fed to keep rates on hold while hinting rate hike in December
At the conclusion of the seventh Federal Open Markets Committee (FOMC) policy meeting in 2018 on 8th November, the U.S. Federal Reserve (the Fed) left the target range of the Fed fund rates (FFR) unchanged at 2.0% to 2.25%.
The Fed reiterated that job creation and household spending grew strongly along with moderated growth in business fixed investment, keeping the unemployment rate at low level. Both overall inflation and core inflation stayed at above 2% on a yearly basis, reflecting stable upswing in pricing pressures of the U.S economy.
Despite global growth headwinds, the Fed is still optimistic on the resilient growth momentum of the U.S. economy with which gradual rate hike cycle remains intact to ensure price stability and prevent U.S. economy from overheating. We believe there will be one more rate hike in 2018.
Oct 31,2018 Economic Acumen Commentary by CEBI Research Team
Hong Kong economic momentum to turn softening
Echoing global headwinds in the form of on-going trade disputes, interest rate hike, decelerating global growth momentum and escalation of geo-political risks, Hong Kong (HK) economy is seen to face easing of economic activities.
For domestic environment, the theme for 2019 outlook will be the shift to the balance of growth drivers, with consumption and investment rather than external trade contributing more to economic growth. For external environment, gradual U.S. rate hikes and slowing China's economic growth remain as the key threats to HK economy.
The recent openings of the Guangzhou-Shenzhen-Hong Kong Express Rail Link and Hong Kong-Zhuhai-Macau mega bridge enhance economic links with China which will spur HK economic benefits.
We remain positive towards HK economic growth on the back of balanced and solid economic fundamentals. For 2018 and 2019, we forecast HK economy to grow modestly by 3.6% and 3.0%.
Oct 19,2018 Economic Acumen Commentary by CEBI Research Team
China’s economic strength weakened in 3Q2018
China's third-quarter economic activities for 2018 witnessed a slowing growth momentum with GDP surging at 6.5% YoY, below consensus estimate of 6.6%, 2Q2018's 6.7% and 1H2018's 6.8%，with growth of fixed asset investment (FAI), industrial production and retail sales decelerating in vary degrees from previous quarters while job market pointed to stable trend.
In sum, China's economy still maintained a stable growth of 6.7% YoY in the first nine months of 2018. Looking forward, the escalation of trade tensions, the U.S. monetary tightening and weakness of renminbi remain as the major downside risks of China's economy in coming quarters.
We believe China's macroeconomic conditions remain stable and the economy will expand by 6.5% YoY in 4Q2018 with which GDP growth will reach 6.6% YoY in 2018.
Oct 8,2018 Economic Acumen Commentary by CEBI Research Team
The PBOC’s fourth RRR cut in 2018
With the aim to boost the stable development of the real economy, optimize the liquidity structure of commercial banks and financial markets, lower financing costs, and support small businesses, private enterprise and innovation, the PBOC announced a cut of 100bp in the required reserve ratio (RRR), effective October 15, 2018.
This is the fourth RRR cut in 2018, reducing the RRR for big banks to 14.5 percent and for smaller banks to 12.5 percent. A net RMB 750 billion potential credits will be injected in the economy with which the cut releases around RMB 1.2 trillion in liquidity with RMB 450 billion of that to offset the maturing medium-term lending facility (MLF) loans.
Overall, the latest RRR cut along with the previous three RRR cuts in 2018, which unleashed trillions of liquidity in the market, help strengthen growth momentum of China's economy.
Sep 17,2018 Economic Acumen Commentary by CEBI Research Team
China’s economic indicators showed stable growth in August
Amid the pessimistic market sentiment driven by the US-China trade disputes, U.S rate hikes and currency depreciation across emerging market (EM) economies, Chinafs economic indicators showed a mixed trend in August, with growth of fixed asset investment (FAI) decelerating further while industrial production and retail sales accelerating in varying degrees.
External trade showed modest growth even though the U.S. will be likely to impose tariffs on extra worth of USD 200bn Chinese goods. Inflation stayed uptrend on higher pork prices due to the outbreak of swine fever. Job market remained healthy as August survey-based urban unemployment rate dropped to 5.0% from July’s 5.1%. In general, China’s economic indicators for August maintained steady growth trend.
In the face of trade war and unstable economic conditions of some EM economies, the global economy is bracing for surging market volatilities that threaten global growth outlook with which China’s economy may be at risk of slowdown in coming quarters. We believe China policymakers will fine-tune both monetary and fiscal policies to strengthen momentum of growth in economic activities and China’s economy is rebalancing to attain more stable economic expansion.
Sep 10,2018 Economic Acumen Commentary by CEBI Research Team
China’s trade remained steady in August despite fears of US-China trade war
Despite the escalating trade friction with the U.S., China's external trade has been surprisingly resilient in August with exports and imports growing at 7.9% YoY and 18.8% YoY. Trade surplus reached RMB 179.8bn.
However, the latest release of China's August official New Export Orders and Import Indexes, the sub-index of manufacturing PMI, fell to 49.4 and 49.1, signaling that external trade sector will experience contraction driven by the impact of trade war.
Pessimistic outlook for international trade driven by increasing trade tensions between the U.S. and the rest of the world has disrupted the global supply chain with which global trade will likely shrink to some extent in coming months.
In order to resist headwinds of trade war, the Chinese Ministry of finance announces to offer export tax refund for domestic manufactured products in selected sectors.
August 30,2018 Economic Acumen Commentary by CEBI Research Team
The continuation of urbanization and rising hygienic standard of general population spur the demand for more investment in waste treatment facilities. Amid rising awareness of environmental pollution, China's current reliance on fossil fuels will be reduced by increasing use of more clean and renewable energy.
In general, China is stepping up efforts to protect the environment during the 13th Five-Year Plan (FYP) period (2016-2020) with which trillion of dollars are projected to invest in the environmental sector to enhance environmental quality.
Environmental sustainability is rapidly moving up the agenda for China and China's environmental service sector will benefit from rising government expenditures to tackle environmental issues.
August 21,2018 Economic Acumen Commentary by CEBI Research Team
Dollar strength and trade disputes weighted on emerging markets
The second half of 2018 is clouding with a worsening global economic outlook amid heightened risks on trade disputes and dollar strength. Plunging Turkish Lira triggered by the U.S.'s doubling of tariffs on steel and aluminum imports from Turkey has set off a contagious wave of financial assets sell-off in emerging markets.
The Lira crisis reflects the concerns about the healthiness of EM economies with high levels of USD debt and reliance on external trade as the U.S. is stepping up efforts to negotiate better trade deals and raise interest rate with capital flowing out of EM.
In sum, tightening of liquidity to suppress potential hiking inflation in the U.S, deteriorating financial market conditions and loss of investors' confidence are at the root of surging market volatility. More intense volatility on the prices of EM financial assets is in sight with which the dollar rally and escalating trade tensions will deepen financial market turbulence.
August 14,2018 Economic Acumen Commentary by CEBI Research Team
China’s economic indicators slowed in July
Amid the pessimistic market sentiment driven by the trade disputes with the U.S., China demonstrated a slow start of second half in the economic activities. China's economic indicators for July showed weakening trend, with growth in fixed asset investment (FAI), industrial production and retail sales decelerating in varying degrees while inflation remained mild.
Job market has been steadily growing as new urban jobs increased by 8.8 million in the first seven months of 2018, year-to-year rise of 0.25 million. July survey-based urban unemployment rate reached 5.1%. Although domestic demand showed decelerating trend, China's economy continues to retain the path of steady recovery.
In sum, domestic demand remains as the major driver of 2H2018 GDP growth and the policymakers will fine-tune economic policies to strengthen momentum of growth in economic activities.
August 9,2018 Economic Acumen Commentary by CEBI Research Team
China’s inflation edged up in July
China's July CPI inflation edged up 2.1 % YoY (+0.3% MoM). The rise of inflation in July was attributable to surging month-to-month increase in non-food prices due to climbing price of petroleum and diesel, resulting 11.2% rise in transportation fuel YTD. 7M2018 CPI reached 2.0% YoY, reflecting stable uptrend of general price level.
Producers' prices posted a positive growth of 4.6% YoY (+0.1% MoM) in July. The extended rebounding of producer prices was mainly attributed to surging energy prices. The rise of factory prices during 7M2018 reached 4.0%, demonstrating an upward trend and reflecting the continuation of stable economic recovery.
In sum, although rising trade tensions between China and the U.S remain a concern for global economic outlook, the steady trend of consumer prices and factory-gate prices indicates that China's economic momentum remains resilient, supported by strong domestic demand and healthy global demand.
August 2,2018 Economic Acumen Commentary by CEBI Research Team
China’s manufacturing sector expanded slowly at the start of 2H2018
China's manufacturing PMI for July edged down to 51.2 from 51.5 last month. The downtrend also extended to the services sector, as non-manufacturing PMI for July moderated to 54.0 against 55.0 in June.
Economic activities in manufacturing sector expanded at a decelerating pace in July on the effects of adverse weather and escalating global trade tensions with which most manufacturing sub-indices worsened, reflecting that manufacturing activities are slowing with demand continuing to wane.
Given the ongoing trade disputes with the U.S, the tightening measures of property market and push for financial deleveraging, China's economy will face varying degrees of economic fluctuations in 2H2018.
Proactive fiscal programs to support domestic demand along with moderately tightened monetary policy help create a favorable environment to revive growth. We believe the China's economic fundamentals remain resilient and the economy will expand by 6.5% YoY in 2H2018 with which 2018 GDP growth will reach 6.6% YoY.
August 1,2018 Economic Acumen Commentary by CEBI Research Team
The Fed to keep rates on hold while hinting more rate hikes in 2018
The U.S. Federal Reserve (the Fed) voted unanimously to leave target range of the Fed fund rates (FFR) unchanged, at 1.75% to 2.0%. The Fed pointed out that job creation, household spending, and business fixed investment grew strongly, keeping the unemployment rate at low level while both overall inflation and core inflation stayed at above 2% on a yearly basis, reflecting upswing in pricing pressures of the U.S economy.
Amid the Fed's optimistic assessment on the resilient growth momentum of the U.S. economy, we expect that there will be two more rate hikes in 2018, likely one in September and one in December.
The increasing likelihood of rate hikes in coming months and the escalating trade tensions between China and the U.S. are posing downside risks to the global economy, which will further enhance market volatility and weaken market sentiment over investment.
Market concerns over corporate earnings risks lead to a high risk premium for equity investments. For 2H2018, global equity markets will follow a much more volatile path due to rising protectionist sentiment in the U.S.
July 25,2018 Economic Acumen Commentary by CEBI Research Team
China to continue fending off property market speculation in 2H2018
China's June property prices demonstrated a fast pace of growth in 20 months, posting month-to-month acceleration of new home prices in 63 cities out of 70 cities tracked by the National Bureau of Statistics.
In 1H2018, property prices in 1st- and 2nd-tier cities became stabilized while the housing prices in 3rd- and 4th-tier cities was restrained because of destocking and strict control policy. For 2H2018, China will continue to discourage speculative property investment while long-term mechanism and policies will be implemented to prevent property bubble and major market turbulence.
With the expectations of slower residential property sales, higher inventory levels, and tighter onshore liquidity, the downside risks of the property sector are rising and we believe further property price stabilization will remain intact. Considering the effect of tightening measures in property market, we set our forecast for China's 2H2018E GDP at 6.5%.
July 16,2018 Economic Acumen Commentary by CEBI Research Team
China’s economic strength sustained in 1H2018
China's GDP witnessed a solid growth of 6.7% YoY in 2Q2018 (Consensus' 6.7% and 1Q2018's 6.8%) and 6.8% YoY in 1H2018 (Consensus' 6.7% and 2017's 6.9%), signaling the pickup trend of economic activities. Domestic demand and external trade surged steadily, indicating that China's economy stays on the path of recovery.
For 2H2018, the escalation of trade tensions triggered by the U.S to impose tariffs on Chinese goods may endanger China's growth momentum. China's policymakers will remain cautious to handle economic fluctuations by exercising appropriate economic policies to withstand the negative impact of trade disputes on external demand. Domestic demand remains as the key growth driver of the economy in which consumer spending and fixed asset investment will play a bigger economic role in 2H2018.
We believe the overall macroeconomic conditions remain stable and the economy will expand by 6.5% YoY in 2H2018 with which 2018 GDP growth will reach 6.6% YoY.
July 13,2018 Economic Acumen Commentary by CEBI Research Team
Trade war to cloud the outlook of China’s external trade in 2H2018
China's external trade still maintained a steady growth in 1H2018, with exports and imports growing at 4.9% YoY and 11.5% YoY. Trade surplus reached RMB 901.32bn. However, on both monthly and quarterly basis, growth of total trade posted slowing momentum as June exports and imports rose only 3.1% and 6.0% (May's 3.2% and 15.6%) while 2Q2018 exports and imports surged only 3.2% and 11.0% (1Q2018's 7.4% and 11.7%).
In sum, pessimistic outlook for international trade driven by increasing trade tensions between the U.S. and the rest of the world disrupts the global supply chain with which global trade will likely shrink to some extent in 2H2018. We believe overseas demand for Chinese products to soften on the kickoff of full-blown trade war, which in turn will undermine growth momentum of China's total trade.
Provided that trading partners such as EU, Japan and ASEAN countries could maintain their current pace of growth and policy tools would be employed effectively by Chinese regulators, China's external trade sector should be able to resist the trade headwinds, lending support to the soft-landing of external trade growth in 2H2018.
July 5,2018 Economic Acumen Commentary by CEBI Research Team
Surging market volatility to reign over Hong Kong stock market in 2H2018
The second quarter of 2018 was dominated by the escalation of trade tensions between China and the U.S., a period when the performance of Hong Kong (HK) equities were suppressed by growing worries over the spillover effects of full-blown trade war on global economic recovery in 2H2018. HK stock market experienced increasing global and local risks with uncertainty and falling liquidity which led to correction of 3.8% in 2Q2018.
For 2H2018, HK market will follow a much more volatile path due to rising protectionist sentiment in the U.S. However, HK equity market remains attractive on strong growth of corporate earnings growth and investors take advantage of dips in the market to accumulate equities.
Investors will shift their investment interest to China for higher returns. The concerns over trade war's impact on the China's growth will fade gradually as it is already well-priced by the market. We estimate the HangSeng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) to reach 31,000 and 12,300 by end-2018E, equivalent to a 12.0x and 8.9x 2018E P/E.
June 25,2018 Economic Acumen Commentary by CEBI Research Team
The PBOC’s RRR cut to resist growth headwinds
The People's Bank of China (PBOC) announced a 50bp cut in the required reserve ratio (RRR), effective July 5, 2018.
Overall, the PBOC's move will release around RMB 700 billion in potential credit, which is more than the net injection of RMB 400 billion in the previous RRR cut in April.
In sum, the escalating trade tensions between the U.S. and China and the U.S. monetary tightening are expected to exert pressure on China's economic growth in 2H2018.
The latest RRR cut will help support the real economy and stabilize financial markets, thus strengthening efforts to maintain sustainable growth momentum.
The PBOC will still maintain neutral and prudent monetary policy to cultivate an appropriate monetary and financial environment for China's economic growth and supply-side structural reforms.
June 15,2018 Economic Acumen Commentary by CEBI Research Team
Weaker-than-expected China’s May data in sight
China's economic indicators for May demonstrated weakening trend, with growth in fixed asset investment (FAI), industrial production and retail sales slowing in varying degrees.
Despite a mild deceleration in domestic demand, China's economic momentum remains stable as job market has been steadily growing with which May survey-based urban unemployment rate dropped to 4.8% from April's 4.9%, supporting our view that China's economy continues to retain the path of steady recovery.
In sum, China will continue to accelerate reforms for more balanced and sustainable growth and we expect China's economy will maintain steady growth momentum for the rest of 2018. In general, China's economy is expected to maintain a healthy growth of 6.6% in 2018.
June 14,2018 Economic Acumen Commentary by CEBI Research Team
The Fed’s second rate hike in 2018
As expected, the U.S. Federal Reserve (Fed) lifted the benchmark federal funds rate for the second time to 1.75%-2.00% in 2018, an increase of a quarter of a percentage point.
Characterized by fiscal expansion through tax cuts along with surging individual and government spending, the U.S. economy looks on track to pursue faster expansion of economic activities while job creation surged as the unemployment rate fell to 3.8%, the lowest since 2000. Latest May inflation and core inflation edged up to 2.8% YoY and 2.2% YoY respectively which has exceeded the Fed's 2% inflation target, indicating that general price level in the U.S is trending upward.
Recent Fed moves, namely seven 25bps rate hikes since 2015 and the downsizing of its balance sheet, have shown the fact that the Fed aims to move gradually to tighten monetary policy in an attempt to ensure the economic upturn and head off inflation. We believe the U.S. economic activities have been reviving at a solid pace with the upbeat resilience, which will likely to warrant two more rate hikes in 2H2018.
June 6,2018 Economic Acumen Commentary by CEBI Research Team
Equity markets to embrace surging volatilities and opportunities
The first five months of 2018 emerged to be a period that volatilities of global equity markets were skewed to the high side and a clouding global growth outlook came with heightened economic and political risk.
Rising U.S. protectionism posts near-term risks on global outlook with which the U.S. actions against China and other countries spark bouts of volatility and derail the momentum of global economic recovery.
In sum, the continued mix of worldwide monetary policies, escalating trade tensions and political instability in the Korean Peninsula, Eurozone as well as the Middle East could make the global economic recovery more challenging, which may trigger more short-term turbulences in equity markets in coming quarters.
Despite market turbulence, we believe the synchronized global expansion will make equity investment more attractive on rising corporate profitability and the outlook for equity markets stays positive in 2H2018.
June 1,2018 Economic Acumen Commentary by CEBI Research Team
Eurozone bracing growth headwinds
Entering into 2018, Eurozone demonstrated signs of slowdown as GDP's growth slowed from 2.7% YoY and 2.8% YoY in 3Q2017 and 4Q2017 to 2.5% in 1Q2018. On quarter-to-quarter basis, GDP's growth grew 0.4%, down from 0.6% in 4Q2017.
Soft growth of economic indicators in 1Q2018 indicated that strong momentum of 2017 growth, the strongest since the pre-recession year of 2007, may not extend into 2018 amid heightened political uncertainties in Italy and Spain as well as global trade tensions triggered by the U.S.
In sum, the structural vulnerabilities, financial market fragmentation, weak bank balance sheets, Brexit and weak government finances, remain as the main challenges of Eurozone.
The uncertainty about the future of the Eurozone and political risks is weighting on recovery of Eurozone, which will decelerate economic momentum in coming quarters due to weakening growth in corporate investments and consumer spending. We forecast Eurozone will grow by 1.8% in 2018.
May 24,2018 Economic Acumen Commentary by CEBI Research Team
Hong Kong economic momentum to stay upbeat
Hong Kong (HK) economy retained a resilient path of economic momentum in 1Q2018. GDP growth for 1Q2018 demonstrated an upswing of 4.7% YoY, surpassing 4Q2017's 3.4% and 2017's 3.8% with which growth of economic indicators accelerated in varying degrees.
Inflation pressure remained mild at 2.3% while the unemployment rate dropped to 2.8%, the lowest in 20 years.
The rebound of retail sales with surging number of visitors to HK as well as robust domestic consumption fueled by escalating residents' income are the key factors to sustain robust consumption growth.
Gradual U.S. rate hikes may consider as the threat to the economy but HK economy is likely to benefit from steady China's economic growth, the U.S. economic recovery as well as the easing fears of US-China trade war.
We remain optimistic towards HK economic growth on the back of robust economic conditions. For 2018 as a whole, we forecast HK economy to grow by 3.8%
May 15,2018 Economic Acumen Commentary by CEBI Research Team
China’s economic momentum remains stable despite mild deceleration in April data
Entering into 2Q2018, China's economic indicators for April faltered, with growth in fixed asset investment (FAI) and retail sales slowing in varying degrees. Despite a mild deceleration in domestic demand, China's economic momentum remains stable.
China's job market has been steadily growing as April survey-based urban unemployment rate dropped to 4.9% from March's 5.1%, supporting our view that China's economy continues to retain the path of stable recovery.
In sum, we expect GDP growth to maintain a medium-high growth rate as China's economy grows with more emphasis on quality and efficiency. In general, the overall macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 2018.
May 9,2018 Economic Acumen Commentary by CEBI Research Team
The U.S. economy to gain more traction with upswing in inflation
Entering into 2018, economic recovery of the U.S. economy continued with the economic fundamentals improving in varying degrees. The U.S. economy grew at an annualized rate of 2.3% in first quarter of 2018, indicating that the recovery momentum is on track. Job creation in the U.S. economy surged as the unemployment rate continued to trend down to 3.9%, the lowest since 2000.
Although the recent FOMC meeting voted to left target range of the Fed fund rates (FFR) unchanged at 1.5% to 1.75%, latest wages and prices grew at 2% YoY which has reached the Fed's 2% inflation target, indicating that inflation is trending upward and more rate hikes are likely in coming FOMC meetings.
Looking forward, the Fed will launch gradual rate hikes and unwind the balance sheet in an orderly manner to ensure a smooth transition to a normalized monetary policy by avoiding disruption of economic recovery and enhancement of market volatility. The upbeat resilience of the U.S. economy, accompanied by a faster-than-expected pace of global economic recovery, will likely to warrant three more rate hikes in 2018.
May 2,2018 Economic Acumen Commentary by CEBI Research Team
Optimism over Hong Kong economic outlook underpinning property market
Hong Kong (HK) economy gains strong traction as economic activities enjoyed an upswing of 3.8% YoY during 2017 driven by strong-than-expected growth in consumption, investment and exports. Strong expansion of economic activities has strengthened the organic growth of residential properties prices and private offices prices which posted 16.7% YoY and 4.5% YoY in 2017 and 1Q2018. Rent surged 8.6% YoY and 1.2% YoY as well.
Entering into 2018, the upward trend is still in sight despite multiple rounds of government demand-side tightening measures in place.
Although the U.S adopts a gradual path of monetary tightening through rate hikes and shrinking of balance sheet in 2018 which may cool down HK's overheated property market and exert some downward pressures on HK economy, strong economic fundamentals along with corporate tax cut for small enterprises, increased tourist visit and several investment themes such as the "Belt and Road" initiative, the "Guangdong-Hong Kong-Macao Greater Bay Area" initiative will be able to support rebound of economic activities in HK, thus extending the buoyant growth of Hong Kong's property.
Apr 26,2018 Economic Acumen Commentary by CEBI Research Team
A new era of quality growth through “Made in China 2025” strategy
The "Made in China 2025" strategy, a blueprint for upgrading the China's manufacturing sectors, has seen steady progress since 2015.
The strategy lists mega projects for China manufacturing upgrade by 2025, including construction of national manufacturing innovation centers, intelligent manufacturing, industrial base capacity and quality enhancement, green manufacturing and high-end equipment innovation.
It emphasizes a deep integration of information technology and industrialization and the development of new-generation information technologies, and calls for promotion of smart equipment, as well as domestic IP for key general chips to ensure national information and cyber security and the growth of China's electronic product industry.
The move signals that the China will revitalize growth momentum through quality instead of quantity and ensure that the benefits of economic growth will be shared by a larger population, further boosting domestic demand and improving the livelihood of citizens.
Apr 17,2018 Economic Acumen Commentary by CEBI Research Team
A good start of 1Q2018 China's economy
China’s economy demonstrated stabilized trend and sound development in 1Q2018 as real GDP growth remained steady at 6.8% YoY, in line with the market consensus and unchanged from the previous quarter’s growth.
1Q2018 macro indicators embraced uptrend as investment, consumption and external trade edged up at a stable pace. The latest data for March support our view that China economic growth will stay on the path of recovery.
Overall, as China achieves great progress to widen economic openness and conduct supply-side structural reforms such as reducing industrial production overcapacity and financial deleveraging as well as prioritizing growth quality and efficiency in new development era, China’s economy is rebalancing to attain more sustainable economic expansion.
We are of the view that the overall macroeconomic conditions remain stable and China’s GDP growth will reach 6.6% YoY for 2018.
Apr 17,2018 Economic Acumen Commentary by CEBI Research Team
A good start of 1Q2018 China's economy
China’s economy demonstrated stabilized trend and sound development in 1Q2018 as real GDP growth remained steady at 6.8% YoY, in line with the market consensus and unchanged from the previous quarter’s growth.
1Q2018 macro indicators embraced uptrend as investment, consumption and external trade edged up at a stable pace. The latest data for March support our view that China economic growth will stay on the path of recovery.
Overall, as China achieves great progress to widen economic openness and conduct supply-side structural reforms such as reducing industrial production overcapacity and financial deleveraging as well as prioritizing growth quality and efficiency in new development era, China’s economy is rebalancing to attain more sustainable economic expansion.
We are of the view that the overall macroeconomic conditions remain stable and China’s GDP growth will reach 6.6% YoY for 2018.
Apr 11,2018 Economic Acumen Commentary by CEBI Research Team
eNew phase of opening up’ for China
President Xi Jinping delivers a keynote speech at the opening ceremony of the Boao Forum for Asia Annual Conference 2018, pledging 'new phase of opening up' for China.
He stresses opening-up, inclusive development for global prosperity, laying out plans to broaden market access to China's economy, including broader market access for foreign investors in the services industry, especially in the financial and manufacturing sectors, creation of an attractive investment environment for foreign enterprises, enforcement of intellectual property rights (IPR) law and expansion of imports.
As China's economy grows with more emphasis on quality and efficiency amid making great progress in structural reforms, President Xi's commitment to further widen the economic openness helps China maintain a medium-high growth rate.
In general, the overall China's macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 2018.
Mar 26,2018 Economic Acumen Commentary by CEBI Research Team
Escalating fears of global trade war
After launching tariffs on steel and aluminum, U.S. President Donald Trump has unveiled a plan to impose tariffs on USD $60 billion Chinese exports to the US. The new tariffs are intended to penalize China for the unfair trade practices with the U.S that causes a huge U.S. trade deficit.
The U.S government also points to regulations that force many U.S. businesses to hand over their technology to Chinese companies as a condition for being able to do business in China with which technology transfer has damaged the interests of the U.S. enterprises.
The U.S. Treasury has been given 60 days to come up with new restrictions on investment by Chinese firms in the U.S.
The move may trigger a costly trade war with the world's second-largest economy with which China, the U.S. and all trading partners will suffer from potential contraction of world trade growth.
Implementation of the tariffs sets the stage for some potential business conflicts among countries in the future.
Mar 22,2018 Economic Acumen Commentary by CEBI Research Team
The Fed’s first rate hike in 2018
As expected, the Federal Reserve (Fed) lifted the benchmark federal funds rate for the first time to 1.50%-1.75% in 2018, an increase of a quarter of a percentage point.
Characterized by fiscal expansion through tax cuts along with surging individual and government spending, the U.S. economy looks on track to pursue faster expansion of economic activities. Recent Fed moves, namely four 25bps rate hikes since 2017 and the downsizing of its balance sheet, have shown the fact that the Fed aims to move gradually to tighten monetary policy in an attempt to ensure the economic upturn and head off inflation.
We believe the U.S. economic activities have been reviving at a solid pace with unemployment rate reaching a 16-year low.
In 2018, three more 25bps rate hikes are expected in line with the balance sheet shrinkage. We think the U.S. economy will continue to recovery modestly with its GDP growing by 2.8% YoY this year.
Mar 14,2018 Economic Acumen Commentary by CEBI Research Team
China’s economic momentum remained stable in 2M2018
China's economic data for first two months of 2018 demonstrated an upward trend, with growth in fixed asset investment (FAI), retail sales, industrial production and external trade showing stable growth in varying degrees.
The latest economic indicators support our view that China economic growth continues to retain the path of stable recovery.
We expect 1Q2018 GDP growth to maintain a medium-high growth rate as China will further make great progress in structural reforms and the economy grows with more emphasis on quality and efficiency. In general, the overall macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 2018.
Mar 6,2018 Economic Acumen Commentary by CEBI Research Team
China’s 2018 NPC: stepping up reforms and opening-up
China's goal of maintaining a stable economic growth to achieve full employment and building a moderately prosperous society become the major emphasis of 13th National People's Congress (NPC) in 2018.
Deepening structural reforms to achieve sustainable economic development is the central theme of this year China's NPC as the year of 2018 marks the 40th anniversary of the adoption of the reform and opening-up policy. As China's reform drive deepens, it has begun to upgrade the program to make its development fairer and more sustainable, shifting its focus from quantity to quality.
This year NPC emphasizes to strongly promote high-quality growth and address development's imbalances and inadequacies.
In sum, China's efforts to promote stable social and economic development, enhance economic stability at home, create new jobs, deepen economic structural reforms, accelerate financial de-risking, alleviate poverty, effectively strengthen environmental clean-up and enhance opening-up policy would become the major agendas in 2018.
Mar 2,2018 Economic Acumen Commentary by CEBI Research Team
China Everbright Greentech Limited (1257 HK)
Inline 2017 results Net profit up 52% yoy; Matintain BUY
CEGL reported an inline FY2017 results with profit up 52% yoy and core earnings up 45% yoy
Biomass construction revenue: +47% yoy; Biomass operating revenue: +124% yoy; HWT revenue + 29% yoy
Overall margin declined by 1.7ppt to 31% as lower margin biomass operating revenue rose faster than HWT revenue
CEGL declared a final dividend of HK$0.09, implying 19% payout
Factoring in the latest project wins and higher earnings assumption, we arrive at a new target price of HK$8.50. Maintain BUY
Feb 28,2018 Economic Acumen Commentary by CEBI Research Team
HK’s massive budget surplus in sight
On February 28, the HKSAR government announced the annual budget for 2018/19. The government has posted a massive budget surplus of HK$138 billion for 2017/18, mainly driven by surging individual and corporate tax revenues, land premium and stamp duties amid resilient GDP growth of 3.8% in 2017.
Although there are concerns over HK fiscal landscape regarding volatile revenue sources and narrow tax base, HK still manages to maintain the fiscal surplus for 14 consecutive years since FY 2004/05.
For the year of 2018, the U.S is tightening monetary policy gradually through rate hikes and balance sheet reduction which may dampen the overheated property market of HK and also exert some downward pressures on HK economy. Nonetheless, solid economic fundamentals along with tax relief for enterprises and individuals, rising number of tourists and investment themes including the "Belt and road" initiative and the "Guangdong-Hong Kong-Macao Greater Bay Area" initiative will be able to support a healthy rebound of economic activities in HK.
We believe the fiscal surplus for FY 2018/19 remains intact and HK economy will maintain growth momentum at 3.2% in 2018.
Feb 12,2018 Economic Acumen Commentary by CEBI Research Team
China’s inflation edged down in January
China's January CPI inflation decelerated to 1.5% YoY (+0.6% MoM) from 1.8% YoY in December 2017 (+0.3% MoM) but in line with the consensus estimate. The drop of inflation was attributable to a year-to-year decrease in food price at 0.5% this month as well as the easing of non-food price from December’s 2.4% to 2.0%. Producers’ prices posted a positive growth of 4.3% YoY (+0.3% MoM) in January, which was in line with the consensus estimate but lower from 4.9% YoY (+0.8% MoM) in the previous month. The easing of producer prices was mainly due to high-based effect. The factory prices still demonstrated an upward trend, which was driven by stable economic recovery and surging commodity prices. In sum, the stable uptrend of CPI and PPI indicates that, supported by strong domestic and global demand, China’s economic momentum remains resilient.
Feb 8,2018 Economic Acumen Commentary by CEBI Research Team
A good start of 2018 China’s trade
China's external trade demonstrated a sound and steady upward momentum in January. Exports, in Yuan terms, rose 6.0% YoY, higher than consensus' 2.6% but lower than December's 7.4% while imports, in Yuan terms, grew 30.2% YoY, beating consensus' 5.3% and December's 0.9%.
The acceleration of trading activities was mainly supported by buoyant global demand for goods from China, and surging imports driven by resilient domestic demand and massive imports of commodities due to the cold weather conditions in January. Looking ahead, a global economic recovery will continue to support China's external trade sector although rising protectionism and uncertainty in international demand could affect trade growth in 2018.
The further stable pick-up in growth of trade to major trading partners such as the U.S., EU and ASEAN increases the likelihood that the current global trade improvement is sustainable. In our view, China's foreign trade growth is expected to remain on a positive track in 2018.
Feb 1,2018 Economic Acumen Commentary by CEBI Research Team
FOMC leaves rates unchanged after the first meeting in 2018
At the conclusion of the first Federal Open Markets Committee (FOMC) policy meeting in 2018 on 31st January, the U.S. Federal Reserve (the Fed) voted to left target range of the Fed fund rates (FFR) unchanged, at 1.25% to 1.50%.
The Fed points out that gains in employment, household spending, and business fixed investment have turned solid along with low unemployment rate and inflation is expected to rise throughout the year.
We believe that the Fed will launch gradual rate hikes and unwind the balance sheet in an orderly manner to ensure a smooth transition to a normalized monetary policy by avoiding disruption of economic recovery and increase of market volatility.
Jan 25,2018 Economic Acumen Commentary by CEBI Research Team
Global growth upsurge
The world economy is gaining momentum and bracing a robust pace of resilient growth as corporate earnings become stronger, oil and commodity prices rebound and geopolitical risks are skewed to the downside. Economic activities in the advanced economies and emerging markets have continued to improve, supported by recovering industrial production and surging global trade.
The revised global growth forecasts for 2018 and 2019 to 3.9% from previous estimate of 3.7% by the International Monetary Fund (IMF) further justify that global economy is gaining strength.
The optimism is also reflected in the equity market, with major indices breaking new highs since the start of 2018. In sum, the reawakening of global economic momentum will further strengthen global trade and investment, paving the way for a stronger growth for the global economy in coming years.
Jan 19,2018 Economic Acumen Commentary by CEBI Research Team
China's economy rebounded with 6.9% growth in 2017
In 2017, China's economy maintained the momentum of stable and sound development. China's economic expansion remained steady at 6.8% YoY in 4Q2017, beating the market estimates of 6.7% and unchanged from the previous quarter's growth.
As China continues to make progress in supply-side structural reforms including reducing industrial production overcapacity and financial deleveraging, prioritizing growth quality and efficiency in new development era, the country's GDP growth rate in 2017 maintained a medium-high growth rate at 6.9% YoY, marking its first rebound since 2010.
Steady growth of macroeconomic indicators was driven by China's supply-side structural reform and macro-control innovation which led to the country's low urban unemployment, pick-up in imports and exports, improvement in the performance of enterprises, increase in fiscal revenue and residents' income. Overall, China's economy is rebalancing to attain more sustainable economic expansion.
We are of the view that the overall macroeconomic conditions remain stable and China's GDP growth will reach 6.6% YoY for 2018.
Jan 10,2018 Economic Acumen Commentary by CEBI Research Team
China’s inflation remained stable in 2017
China's December CPI inflation edged up 1.8 % YoY (+0.3% MoM and November's +1.7% YoY), beneath the consensus estimate of +1.9%. The rise of inflation in December was attributable to surging month-to-month increase in food prices due to cold weather.
Producers' prices posted positive growth of 4.9% YoY (+0.8% MoM) in December, beating the market expectation of 4.8% but lowering than November's 5.8% due to the high-base effect. The upward trend of factory-gate prices was driven by stable economic recovery, a tight labor market and cuts on overcapacity.
For 2017, the CPI inflation fluctuated between 0.8% and 2.5%, with year-end inflation reaching 1.6%, safely lower than the official target of 3.0% and 2016's 2.0%. The PPI rose 6.3% YoY in 2017, reversing the deflation of producer prices between 2012 and 2016. In sum, the stable trend of consumer prices and factory-gate prices indicates that China's economic momentum remains resilient, supported by strong domestic demand and healthy global demand.
Jan 5,2018 Economic Acumen Commentary by CEBI Research Team
Equity markets carrying new highs in 2018
2017 was a year of harvest in the global stock market. Dow, S&P 500, NASDAQ and Nikkei posted YoY growth of 25.1%, 19.4%, 28.3% and 19.1% while Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) soared 36.0% and 24.6%.
The global business cycle continues to evolve with global economies demonstrating a steady upswing in economic activities and the monetary stance of major economies becomes clearer and more transparent.
Stable tightening of liquidity to suppress potential hiking of inflation, improving financial market conditions and gradual restoration of confidence are at the root of sustaining the growth of economic activities. As strong economic growth boosts corporate earnings, global equity markets can rise further. We expect the global economic recovery to gain more traction, thus extending equity market rally in 2018.
