Wall Street Analysts See Economic Pick-Up In China
$HSBC, $GS
Wall Street analysts are now predicting a pick-up of China’s economy in 2-H of this year after its GDP (gross domestic product) data for Q-2 came in well above market expectations.
China’s Q-2 GDP expanded 7% Y-Y, remaining unchanged from Q-1. It grew 1.7% over the prior Quarter, the National Bureau of Statistics announced last Wednesday.
The growth rate beat the median market forecast of 6.9% for Q-2.
“The economic data points released are positive indications that China’s economy is coming through a bottoming process,” said Brendan Ahern, chief investment officer of the US fund company KraneShares.
“Second quarter GDP generally surprised on the upside. The largest driver appears to be the services,” said Qu Hongbin, chief China economist with the Hongkong and Shanghai Banking Corporation (NYSE:HSBC) in a report.
“The acceleration was broad based: primary, secondary and tertiary industry GDP all rebounded sequentially,” said Song Yu, an economist with Goldman Sachs (NYSE:GS).
The growth rates of 7.5, 7 or 6.5% are the envy of other economies.
The most impressive is the 10.6% growth rate in retail sales, which shows the long-run policy benefit of urbanization and raising domestic consumption.
Most expected that China’s re-balancing would take years with highs and lows as the destination is most important. Recent interest rate cuts have steepened the Chinese yield curve, which is a sign the economy has likely bottomed out with stronger prospects going forward.
Other analysts believe that China’s economic recovery will continue with the help of government policies.
The underlying economy appears to be growing at a more modest pace, and it remains both at an early stage and fragile. In order to strengthen and sustain the recovery, more policy easing measures are likely still needed and likely in 2-H of Y 2015, Qu said.
China has a wide range of policies that will beneficially affect the economy in Quarters to come.
One Belt One Road, Internet Plus, and Made In China, to name a few. Continued focus on the implementation of these policies will help mitigate Greece’s turmoil in Europe and the continued low growth environment in the United States.
Song said that “as a result, we do expect activity growth to accelerate further in Q-3, which will keep the economy on the track of hitting the around-7.0% growth target.”
Have a terrific week.
HeffX-LTN
Paul Ebeling
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