China’s economy accelerates in Q1, Singapore NODX beats expectations

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By Margaret Yang, CMC Markets

China’s headline GDP growth accelerated at a pace of 6.9% in the first quarter this year, boosted by higher retail sales, fixed-asset investment and growth in exports.

The result beat the consensus growth rate of 6.8%, and also gave the market a welcome surprise about the policymakers’ full-year growth target of 6.5%. Robust retail sales, real estate investment, industrial production and credit growth further strengthened the outlook of Asia’s largest economy. This will also reinforce the policymakers’ neutral monetary stance in order to contain inflationary risk and reduce overcapacity.

According to the National Bureau of Statistics, the final consumer expenditure contributed to 77.2% of the first-quarter GDP growth, while strategic emerging industries and the property sector contribute 10.3% and 7.2% respectively. The contribution of exports has flipped to 4.2%, from -11.5% at the same time last year.

Some market participants, however, remain cautious on future development as they expect this expansionary cycle to peak soon, with GDP growth consequently falling in the second half of this year. Despite upbeat economic data, the Shanghai composite index closed 1.1% lower on Monday, testing the key support level of 3,200 points.

CSOP FTSE China A50 ETF

Singapore’s Non-Oil Domestic Exports (NODX) expanded at a faster-than-expected pace of 18.9% in March, following the astonishing 21.6% increase in February.  The growth was mainly attributed to strong demand pick up from China (+65.1%), Taiwan (+54.0%), Hong Kong (+11.5%) and all of the top 10 trading counterparts.

By segments, electronic NODX slowed to 5.2% in March, from a 17.2% rise in the previous month. On the other hand, non-electronic NODX grew by 20.8% in March, building on a 22.7% increase in the previous month. Petrochemicals, specialised machinery and structural parts made of iron, steel and aluminium were among the main drivers of non-electronic domestic exports, according to IE Singapore.

Oil domestic exports expanded 68.5% year on year in March 2017, following the 82.5% growth in February. Higher sales to China (+238.5%), Australia (+210.1%) and Hong Kong (+110.5%) contributed the most to the year-on-year increase of oil domestic exports.

This suggested that Singapore’s economy is benefiting from a cyclical uptrend fuelled by a broad recovery in global trade. In spite of recent geopolitical headwinds, the fundamental elements will provide support for the equity market and boost market confidence, after all the geopolitical dust settles.

From IE Singapore

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.