Authored by Simon White, Bloomberg macro strategist,
Money and loan data from China continue to show few signs of a sustained upturn.
Notably, though, stock futures in China are only marginally lower, suggesting they are reaching their saturation point with bad news.
China’s M1 came in below expectations at 1.9% year-on-year (2.5% was expected), while M2 was in line at 10.3%.
As the chart below shows, real M1 is stagnant, and in order to have confidence China is on the cusp of a sustainable upturn, it would need to show a more decisive rise.
Loan growth also disappointed expectations, however month-to-month data is noisy. To see trends, it is best looked at as the annual percentage change of its 12-month rolling sum. On that basis, total new loans are falling, but the deceleration might be easing off.
More unequivocally positive is household loan growth, which while still negative, is rising, and at the current rate growth will be positive in a few months. This reflects a redressing of the imbalances that were worsened in the pandemic, as policymakers focused on supporting the industrial and export sectors at the expense of the household sector.
Real estate continues to be one of the biggest risk factors to a recovery in China, and thus bears watching. The debt of real estate is currently bouncing around the new lows it recently made.
China property-development Country Garden company failed to pay interest on dollar bonds a few weeks ago.
On the other hand, there are positive signs too, such as rising growth in floor-space of newly started houses, and an increase in the annual-growth rate of house prices, especially in tier-1 cities.
Stocks though, look like they may have absorbed all the bad news they can, and are bottoming. Incrementally less negative news may be sufficient for them to continue rising.