July 6, 2020

Chart of the Week: Investors increasingly bullish on outlook for China

by Fathom Consulting.

Chinese equities jumped by more than 5% on Monday as investors priced in a sharp bounceback in the world’s second largest economy. The Shanghai A-share index closed almost 8% above its January 2020 level, when measured in US dollars, and has outperformed other major bourses on that metric. It marks a sharp turnaround from the beginning of February, when Chinese equities were heavily sold off as Wuhan went into lockdown and COVID-19 was largely expected to be a China-centric shock. However, the virus has since spread all over the world, with stringent lockdowns imposed in almost all countries. Despite being the apparent country of origin, China seems to have been able to contain the virus much more effectively than large economies in Europe and the US. This has allowed an easing of restrictions that is translating to stronger economic activity. Industrial profit was up 6% year-on-year in May. Meanwhile, the Caixin services PMI for June rose to 58.4, its highest level in more than ten years.

 

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