China: then and now
Over an interview with Frontera’s Editorial Director, Gavin Serkin, the emerging markets debt manager at Aberdeen Asset Management, Kevin Daly, shared his outlook 2017 for China. While Daly agrees that China has had a rough ride in 2016, he sees the situation and prospects vastly different now.
Last year, about this time, the emerging markets (EEM) (VWO) were in a knock-down phase. As for China, the renminbi was weakening quite significantly, and equity markets were beaten. There was a lot of market concern over China back then. After two major market crashes sustained in mid-2015 and towards the end of 2015, China’s stock market began 2016 in a lull, only to recover marginally through 2016. The Chinese stock market tracking iShares China Large-Cap ETF (FXI) has gained over 19% over the past year (as of Jan 13).
Through 2016, China saw a year of stable, steady growth. Its domestic economy is still doing well, with property prices still booming.
Aberdeen’s Outlook 2017 for China
For 2017, this BRIC economy (BKF) (EEB) also has a very important political event lined up in 3Q17; the 19th National Congress of the Communist Party of China or the 19th Party Congress. The event should allow President Xi Ping to solidify his power base in China. Since a majority of the Politburo Standing Committee (the top decision-making body in China) members are to retire at this years’ congress, the event would allow Xi Ping to re-staff the committee with members that ensure the enforcement of his policies more effectively.
Going ahead, emerging markets expert Kevin Daly sees some stabilizing growth in China (ASHR) (MCHI). We could see some sort of credit growth to fuel the economic engine, and maybe the easing of credit later on if things start to get heated up too quickly. Daly continues to see the property sector going strong in China, especially in the tier one cities. He, however, does see China placing some tightening measures to squeeze in those prices and to keep the markets on board.