Chinese Retail Sales Got The Golden Touch

Chinese Retail Sales Got The Golden Touch
Theodora Lee Joseph, CFA

3 months ago2 mins

What’s going on here?

Chinese retail sales finally ticked up in October, so maybe the country ought to make its lucrative Golden Week public holiday a more frequent affair.

What does this mean?

China’s shoppers haven’t been generous lately, not least because falling property prices have undermined folks’ confidence in their biggest asset. But cheaper prices seemed to convince the country to spend last month: retail sales were over 7% higher in October than at the same time last year. (Mind you, those older figures were lower than usual, partly because the country skipped its money-making Golden Week holiday last year.) Industrial sectors – think mining, manufacturing, and energy – picked up too, making a better-than-expected 4.6% more of their goodies than the same time last year. That said, the ailing country’s far from recovered. Investment in fixed assets – physical items that businesses use in their operations – slipped below forecasts this year, pulled down by lackluster interest in the property industry. The central bank’s taking that seriously, pumping the banking system up with the most cash since 2016 to support the economy.

China retail sales and industrial output

Why should I care?

The bigger picture: All problems are not made equal.

The Chinese real estate sector – with its debt-laden companies and empty apartments – could weigh on the country for up to a decade. But don’t count the whole country out for that long. Certain sectors are already recovering, and the companies within them could shake off their slump within a year. Tech giants Tencent and Alibaba will soon reveal whether they’re on track for that: they announce quarterly results later this week.

For markets: Everyone loves an underdog.

Analysts at UBS certainly seem to believe in China’s potential, predicting that the country’s stocks will beat Indian ones next year. That take goes against the grain, but since Chinese stocks are trading for way less than Indian equivalents, investors may well take the opportunity to lock in longer-term prospects at a discount.

Chinese vs Indian stocks
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