The S&P 500 hit a five-year high last week following news that Chinese exports surged 14% in December, exceeding economists’ estimates for a 4.6% increase. The better-than-expected year-over-year growth is a positive sign for global trade and the Chinese economy. Importantly, it suggests the impact from the sovereign debt crisis in Europe and “fiscal cliff” worries in the US haven’t hit Chinese exporters as hard as economists anticipated. It also suggests the economic slowdown in China may have bottomed, after a seven quarter streak of decelerating GDP growth. Moreover, imports grew 6% in December, besting economists’ projections for a 3.3% rise. This might indicate that Beijing’s efforts to juice the economy are working. In September, the country’s main economic planning body approved about $160 billion in projects to improve domestic infrastructure such as highways and ports. While this is just a quarter of the stimulus money unleashed in early 2009 following the financial crisis, it’s having some impact. For example, the HSBC Flash China Manufacturing Purchasing Managers’ Index logged a 14-month high in December, driven by an upturn in domestic growth. Investors are clearly encouraged by this activity; the Shanghai Stock Exchange delivered a 15% return in December alone. Summing up, while there is risk that this momentum may slow in the coming quarters, fears of a crash or “hard landing” in China have abated for now, and in our view, that should be a near-term positive for global markets.
*The information contained in this email was derived from sources believed to be reliable, but completeness and accuracy are not guaranteed. The opinions expressed constitute our judgment as of the date of this email, but are subject to change without notice. Past performance may not be indicative of future results. This information is not intended as an offer or solicitation for any financial instrument. The opinions expressed do not take into account individual client circumstances, objectives, or needs and are not intended to be investment recommendations or strategies.