Another brutal night for investors in Chinese stocks.The Shanghai Composite fell 1.74% to a new post-crisis low.
Not helping: Data from the National Bureau of Statistics that showed a 5.4% drop in earnings at industrial companies.
Meanwhile Premier Wen has given hints that exports are slowing even further in August.
Here’s Nomura’s Zhiwei Zhang:
Premier Wen visited Guangdong province on 24-25 August to check on conditions in the export sector, the area being one of the major production bases for exporters. He acknowledged that “leading indicators such as new orders suggest exports still face difficulties in the future”. He talked about several policies to promote exports, including expediting the export tax rebate and encouraging firms to develop brands and intellectual property.
Premier Wen’s decision to visit Guangdong at this point and the focus of his speech on exports suggest to us that export performance may have remained weak, or may have even worsened in August, after growing at only 1% y-o-y in July. We understand that the central government can observe trade data at least every 10 days. The policies mentioned by Premier Wen will likely help exports in the long term, but may not be effective in turning around exports in the short term.
Bottom line: There’s a lot of chatter about more stimulus and so forth (and this is actually happening) but for now, the earnings data continues to be pretty bad.
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