According to analysts from Danske Bank, the spill over to the rest of the world from the hard landing in Chinese construction has been significant and now it should benefit from higher activity.
Key Quotes:
“The hard landing in Chinese construction looks set to be ending. We look for a gradual recovery of the construction sector over the next year.”
“The sharp slowdown in construction has been a heavy drain on China’s economy and global commodity markets over the past two years. A recovery of this sector could prove an important game changer for industries, countries and markets exposed to Chinese construction.”
“It would thus give support to Chinese equities and global risk sentiment, as it reduces the risk of an overall hard landing in China.”
“A rise in commodity demand would in turn give relief to commodity-exporting emerging market countries such as Brazil and Chile and benefit Australia’s exports of iron ore. It would also dampen deflationary pressure in China – and globally. Easing deflation fears will underpin higher bond yields during 2016.”
“To conclude, a recovery in the Chinese construction sector could prove a game changer. The hard landing in this sector has had consequences not only for Chinese growth but also for global risk sentiment, base metals commodities and emerging markets commodity exporters.”
(Market News Provided by FXstreet)
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