CHART OF THE DAY: Chinese Stocks Are Signaling A Big Jump In GDP Growth

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Economists have long debated whether China’s slowing economy was headed for a hard or soft landing.

But in recent weeks, many have noticed the “green shoots” coming out of the world’s second largest economy.  GDP growth appears to have stabilised, retail sales and industrial production are strong, and an early preliminary survey suggests manufacturing activity is slowing at a slower rate.

Chinese stocks are also reflecting this improving sentiment.

“The latest data out of China is consistent with our economist’s view that the economy is bottoming out,” write the analysts on Morgan Stanley’s Global Equity Strategy team. “The recent improvement in MSCI China also suggests a period of better China macro newsflow ahead.”

As you can see, Chinese stocks have been a pretty good leading indicator of GDP.  And they’re looking much more optimistic lately.

chart of the day, chinese stocks, oct 2012

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