The latest round of Chinese inflation figures was released on Monday, and another drop could fuel a stock market rally.
CH50 – Daily Chart
The China 50 index is looking to test the resistance at 13,300, which could happen with the inflation release.
Last month saw inflation in the country drop to 1% from 2.1%, and traders would welcome another sign of cooling price pressures. However, RBC analyst Nik Modi worries that covid “revenge spending” could push China’s prices.
“This is what I worry the most about: China’s reopening could disrupt the current logic and the current trend” in inflation, which is moderating in the US, by pushing up demand, which in turn pressures supply worldwide and results in higher costs of production,” he said.
Meanwhile, China’s government has singled out the export sector for additional help to boost the country’s recovery. Premier Li Qiang said Beijing was working on “a combination of supportive policies” for exporters, saying the economic recovery was critical and more measures were needed to boost market confidence and “consolidate the growth momentum”.
“We must help exporters to secure orders and expand markets with a combination of trade stabilisation policies,” state news agency Xinhua stated.
The Ministry of Commerce suggested customs procedures, logistics, funding, and more significant market access from trade agreements could be part of the assistance given.
According to customs data, exports fell 6.8% from a year earlier in January and February. According to analyst estimates, the export data for March is expected to fall by an average of 5%.
China’s Improving Inflation Expected To Boost Stock Prices
That expectation was set after China’s manufacturing purchasing managers’ index fell to 50.4 in March from 52.4 a month earlier. That was in line with other nations such as the USA, which also puts pressure on manufacturers as markets fear an economic slowdown. One of the weakest areas for Chinese exports was US-bound shipments, which dropped 21.8% in the first two months of this year after tensions arose between the two countries.
A lower inflation number could see the China 50 index vault above the 13,300 level and head for the 13,800 level.
