Fast Asia Open: ready for China GDP

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Big day for Asia: China will release its 2015 GDP report.

Gabriel Wildau in Shanghai has 5 things to watch for here. The headline is that annual GDP is anticipated to have grown at 6.9 per cent, just as it had in the third quarter, confirming that last year was the slowest 12 months for China since 1990. The target for this year was “around 7 per cent.”

Weaker than expected figures are likely to cause concern; higher than expected figures are likely to cause skepticism.

“Policymakers’ efforts to smooth the figures in response to last year’s sharp downturn and in order to meet official targets have made them less useful as a guide to economic conditions,” notes Chang Liu at Capital Economics, adding:

For what it is worth though, we expect the official figures to show growth of 6.9% y/y last quarter, unchanged from Q3. In terms of what actually happened last quarter, our China Activity Proxy does point to growth having been broadly stable but it suggests that the economy is expanding at a markedly slower rate than the official figures show.

At the same time, China releases December figures on industrial production and retail sales. These will get far less attention, but in some ways they could provide a better sense of where momentum was as the year concluded.

Industrial output is expected to slow to 6.0 per cent, year-on-year, from 6.2 per cent, while retail sales figures are anticipated to rise slightly to 11.3 per cent. In a nutshell, that’s the transition from an export-based economy to a consumption-led one.

Ahead of the data, markets are being cautious. With no overnight session in the US to guide them but another fall in European equities, markets are set to continue edging downwards, but the panicky start to the week has subsided.

Futures suggest Japan’s Nikkei 225 will open 0.2 per cent lower, after the average tumbled 1.1 per cent on Monday, breaking through the 17,000 mark to its lowest close since September 29. This year it’s down 10.9 per cent.

Hong Kong’s Hang Seng Index is expected to fall another 0.3 per cent, after losing 1.5 per cent on Monday and closing at its lowest since September 2012. The index has shed 12.2 per cent this month and is off nearly one-third since a multi-year peak last April.

In early trading, Sydney’s S&P/ASX 200 fell 0.3 per cent, in what would be a 12th loss in 13 sessions. The energy sector is once again leading losses, falling 1.3 per cent. Shares of Rio Tinto are down 1.4 per cent after the miner lifted output by 10 per cent – less than forecasts – to 87.2m tonnes in the final quarter of 2015.

The Japanese yen, considered a haven asset, finished Monday 0.3 per cent weaker, and the fall was extended by 0.1 per cent early today, to 117.4 per dollar. The price of Brent crude finished Monday with a 0.6 per cent fall, at $28.76 a barrel, but early in the session it had been down as much as 4.3 per cent, to $27.70.

Here’s the economic calendar (Hong Kong times):

  • 10am: China GDP: fourth quarter and full year
  • 10am: China industrial production and retail sales for December
  • 4:30pm: Hong Kong unemployment rate
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