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
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Open account Try 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
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