The week of December 11th-15th is expected to seek significant attention on China’s stock market, with a focus on the November consumption and production indicators, as well as the potential for a central economic work meeting to discuss China’s economic policy for next year.
Last week, the Chinese stock market ended in a bearish trend, with the Shanghai Composite Index falling below the 3000 mark due to the impact of Moody’s downgrade of China’s national credit rating outlook. The Shanghai Composite Index ended the week down 2.05% at 2969.56. The weekly declines in the Shenzhen Component Index and the ChiNext Index were -1.71% and -1.77%.
Foreigners turned net sellers again. Last week, foreigners sold a net 5.787 billion yuan ($873.9 million) worth of stocks in the mainland Chinese market through the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect. They sold 4.919 billion yuan ($684.4 million) in the Shanghai market and 868 million yuan ($120.7 million) in the Shenzhen market.
This week, the Chinese stock market is expected to closely watch financial indicators such as November’s new yuan loans, as well as economic indicators such as consumption, production, and investment.
First, the Bank of China will announce the statistics for new yuan loans on November 13th. Trading Economics a market research firm forecasts that China’s new yuan loans in November will rebound to 1.1 trillion yuan ($1.5 trillion), exceeding the previous month’s 738.4 billion yuan (102.7 billion). It is predicted that China’s stimulus measures to support the economic recovery will gradually take effect.
Then, on the 15th, the National Bureau of Statistics of China will announce indicators for November’s retail sales, industrial production, and fixed asset investment. Trading Economics expects China’s retail sales growth rate in November to record double digits at 12.2%, greatly exceeding the previous month’s 7.6%.
The industrial production growth rate for November, which will also be announced on the same day, is expected to exceed the previous month’s figure at 5.8%. The cumulative growth rate of fixed asset investment from January to November is also expected to slightly increase to 3%, up from 2.9% in January to October.
However, shaking off deflation concerns (a decline in prices amid the economic downturn) remains challenging. According to China’s National Bureau of Statistics on the 9th, the Consumer Price Index (CPI) in November dropped by 0.5% compared to the same period last year, marking the steepest decline in nearly three years. The high pressure of deflation is attributed to weakened consumer spending. During the same period, China’s Producer Price Index (PPI) continued its 14-month consecutive decline
Amid this, there is interest in whether the Bank of China will freeze the interest rate on 650 billion yuan ($98.1 billion) of one-year medium-term lending facility (MLF) funds that mature on the 15th. While the market expects the interest rate to be frozen, some believe that there is still a possibility that the MLF interest rate could decrease by the end of the year. The Bank of China previously lowered the MLF interest rate by 0.15 percentage points to 2.5% in August amid downward pressure on the economy. If the MLF interest rate is frozen, the Loan Prime Rate (LPR), which will be announced on the 20th of this month, is also likely to be frozen.
On the other hand, on the 8th, the Chinese leadership signaled a focus on next year’s economic growth during a crucial Central Political Bureau meeting of the Chinese Communist Party. They hinted at introducing aggressive stimulus measures, including expansive fiscal policies, to support the economy.
The December Central Political Bureau meeting is typically a preliminary session for the Central Economic Work Conference, where discussions from the Central Economic Work Conference are reviewed. Through the announcements made during the meeting, one can gauge the broad framework of China’s economic operations for the coming year. The imminent Central Economic Work Conference, set to determine China’s macroeconomic policy direction for next year, has been confirmed with the convening of the Central Political Bureau meeting. The Central Economic Work Conference is expected to take place after President Xi Jinping visits Vietnam, scheduled for the 12th to 13th.
Especially on the 8th, the Political Bureau meeting emphasized a proactive strengthening of fiscal policy, focusing more on ‘growth’ than ‘stability.’ Experts anticipate that next year’s robust fiscal policy will play a leading role in stabilizing China’s investment, consumption, and overall growth. Observers also noted that China is expected to raise its fiscal deficit rate from this year’s 3.8% to 4% next year.
As China’s leadership signals its intention to boost the economy, there are expectations that the growth target for next year will be set at around 5%, similar to this year. While various institutions recently forecast China’s growth rate for next year in the 4% range, there is speculation that the target could be set higher. HSBC Global Research, in a recent report, suggested that the December Political Bureau meeting had a relatively optimistic economic outlook, anticipating that under an actively expansionary fiscal policy, the Chinese government would set a growth target of 5% for next year.
By. Insun Bae
Most Commented