With China opening 3 percent higher after a week-long holiday, there is a sense that the worst is behind, says Ben Bei, director, chief Hong Kong/China strategist at CIMB Securities.
He says this rise is based on macroeconomic cues coming out of the country. There is an improvement in the official PMI data, along with the announcement of some property stimulant measures, which bode well for the country, he adds.
Below is the verbatim transcript of Ben Bei's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: It's been a clean run on the upside for global markets at least for the last couple of weeks. Do you think the worst is now behind us?
A: In short-term the worst is behind us. On Hong Kong, China market we can see - actually in the past two weeks the Hong Kong market has rebounded about 10-15 percent from the bottom and already which is backed up by some fundamental improvement, for example after the China government carried out a lot of growth projection policies, for example they tried to boost the property demand by cutting the down payment ratio for property market and also they carried out some auto stimulus on auto market as well. However, on macro data we saw improvement after the official Purchasing Managers’ Index (PMI) data in China as well. All this at least convince some investors that China is trying to stabilise its growth.
However, while the Hong Kong market has rebounded in the past two weeks as we saw that the China A-share has been suspended due to the Golden Week holiday, so they need to catch-up some upside once they resume in trading and that is why we saw some divergence of A-share versus H-shares today.
Latha: Is there any other Chinese data that you would watch out for this week or early next week?
A: We will have a September data may be late this week or early next week. Our expectation is that it will take some time for the government policies to be reflected in those macro data. However, for some leading indicators, for example, the long and M2 growth should be helping.
Latha: Any other industrial data?
A: There was one important data released yesterday which also is a very positive factor that is the reduction of China's foreign reserves. In September the number has been coming down for about USD 40 billion and that is almost 50 percent of the reduction in the August which we saw about USD 92 billon. So, that is a very big confidence booster to the market.
Sonia: Since you track some of the other Asian markets as well, we have got some slowdown in data coming in from say Japan. This morning the machinery orders in Japan have fallen 3.5 percent, are you worried about any other pocket or do you think that the data is improving there as well?
A: Like the industrial data, it will take some time at least several months after the China's government policy starting from June to July. So I am not expecting a significant improvement on that kind of data in these two months but I expect to see some stabilisation by end of this year and early next year.
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