Highlight of today's Asia-Pacific session was release of monthly activity data for April from China. Data can be best described as mixed, with industrial production growing more than expected, while urban investments and retail sales data missing expectations. Data is worrisome as it showed a big and unexpected slowdown in retail sales growth, while industrial production accelerated more than expected. This hints at weakness of domestic demand and hints that economic growth is more and more reliant on supply rather than demand. Weakness of Chinese consumer also increases risk for the Chinese economy, which is exports-driven, at times of increasing trade tensions with the United States. Chinese HSCEI index (CHN.cash) dropped around 1% following release of the data.
China, monthly activity data for April
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app- Retail sales: 2.3% YoY vs 3.8% YoY expected (3.1% YoY previously)
- Industrial production: 6.7% YoY vs 5.4% YoY expected (4.5% YoY)
- Urban investments: 4.2% YoY vs 4.6% YoY expected (4.5% YoY previously)
However, post-release drop has been fully erased later on, with index catching a bid after 6:00 am BST. The move higher was triggered by an announcement of new support measures for Chinese struggling property sector. People's Bank of China announced that it will drop nationwide minimum mortgage interest rate. On top of that, PBoC decided to cut minimum down-payment ratio for first-time home buyers from 20 to 15%, while the ratio for second homes was cut from 30 to 25%. Last but not least, Chinese Vice Premier He Lifeng said that local governments should acquire homes at reasonable prices and turn them into affordable housing. These are the most powerful measures announced by Chinese authorities so far, that are aimed at supporting demand for Chinese real estate.
Taking a look at CHN.cash chart at D1 interval, we can see a longer lower wick of today's daily candlestick, that is reminiscent of the drop triggered by release of activity data for April. However, as one can see on the chart, the index is now trading higher on the day and resumes a move towards the 7,000 pts resistance zone. The index is trading at the highest level since the turn of July and August 2023.
Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.