Chinese Economic Data Improves, Not Enough To Push Asian Stock Markets

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The Chinese economy has shown constant growth with its expected recovery from its stringent Covid policies last year, which caused a significant slowdown. Despite improved performances, Asian markets showed losses on 18 April.

Economists were surprised by the considerable growth of the Chinese economy for the first quarter. Its economy grew 4.5% year on year, coming from the decision of the government to reopen its borders and resume trading with different countries.

According to Christopher Wong, a currency strategist for OCBC in Singapore, “On balance, quite an encouraging report with retail sales, GDP and property sales coming in higher than expected, reinforces the story that recovery momentum post-pandemic remains intact.”

Multiple reports show sales growth in the Chinese market grew exponentially and almost hit a two-year high. Factory output growth has also displayed consistent improvement. These improvements show that the Chinese are on track with its 5 % target for economic growth for the year after missing last year’s goal.

As a result, the Australian and New Zealand currencies increased after the GDP data as the increased exports impacted both currencies due to higher demand from Chinese manufacturers.

However, the increased performance of the Chinese markets failed to ignite a sustained rally in other Asian regions. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.5 %, while Hong Kong’s Hang Seng Index fell 0.85% due to lower consumer and technology stocks.

Australian shares also dropped by 0.45%, and analysts believe these drops were due to underlying Chinese data falling below expectations despite solid headlines. 

David Chao, a global market strategist for Asia Pacific at Invesco, noted, “The thesis the market has that China is exiting the pandemic and growth will be driven by consumption is still intact. While the recovery is on track, I don’t think economic growth from what we have seen so far is exceeding expectations too much.”

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