Asian Stocks Braced for Chinese GDP Release

Asian stocks were primed for the latest release of Chinese GDP on Tuesday.

Markets expect a reading of 1.8% for the Chinese Q4 growth figures.

CHI50 – Daily Chart

CHI50 – Daily Chart

The Chinese index of 50 blue-chip shares has rallied sharply in 2023 and will look to continue higher with the previous resistance at 14,800.

The GDP indicator could set up for a positive surprise as the figures are expected to show damage from the Zero Covid strategy of lockdowns.

A renewed surge in infections in December hurt them. Official data expected slump activity comparable to the last Shanghai was locked down in the spring of last year. Economists predict that gross domestic product growth in the final quarter may have slowed by 1.6%. According to the median estimate, this is more than half of the third quarter’s 3.9%.

According to the survey, full-year GDP was likely around 2.7% last year, which is well below the government’s optimistic target of “around 5.5%” and slightly above the 2.2% increase posted in 2020.

China’s growth is expected to be hit by a sharp drop in consumer spending in major cities as residents stay indoors. Consumer sentiment was also sharply lower, having touched record lows in previous months. Rising unemployment and slower income growth has weighed on households’ desire for spending.

Despite uncertainty over the GDP numbers in the short-term, global investors continue to buy into Chinese blue chip stocks, from large consumer staples to financial firms, as the country’s stock indices rally on optimism about the reopening.

An analyst at JP Morgan said of Chinese stocks: “Don’t underestimate this rally.” A research note pointed out that China’s growth rate this year is likely more than six times that of the US.

“Not only does that mean that MSCI China absolute earnings per share growth and return on equity is set to surge, but an even more dramatic shift in relative terms is now in sight,” the analyst said.

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