Stocks surge to 7-year high as investors see good in bad news over China exports slump
Exports and imports fell by double digits last month – a rare twin blow last seen in 2009 – as mainland and HK markets continue bull run
China's exports and imports both fell sharply last month, sparking concern about the health of the world's second-largest economy, although the slip failed to prevent the stock markets from posting another day of frenzied rises.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong increased 4.3 per cent, extending a rise for the eighth day. The Shanghai Composite Index touched a seven-year high with a gain of 2.2 per cent. Hong Kong's Hang Seng index closed 2.73 per cent higher.
"There's a decoupling of the performance of the micro-sectors from the macroeconomy. When the economy is in bad shape, it's like great waves lashing the beaches - the victor becomes a king, while the weak loses the game," said Wendy Liu, head of China equity research at Nomura.
The stock market surge had been mainly driven by a flood of funds hunting for undervalued stocks, she said.
Despite challenges for mainland companies in reaping profits, their operating efficiency might eventually improve as costs were slashed, she said. "Usually the stock market bottoms out when profits sink to the lowest," she said.
Exports slumped 15 per cent in March from the same month a year earlier, falling to US$144.6 billion after jumping nearly 50 per cent in February, with the volatility partly amplified by seasonal factors.
Imports dropped 12.7 per cent to US$141.5 billion. Such double-digit falls in both exports and imports in the same month last occurred in 2009, when slumping external demand dealt heavy blows to China's economy.
Watch: Slumping trade data hits China
Economists had forecast a 12 per cent rise in exports and an 11.7 per cent fall in imports for last month. The trade surplus in March was US$3.1 billion, a two-year low.
The World Bank yesterday cut its forecast for China's economic growth to 7.1 per cent in 2015, from the 7.2 per cent expansion it predicted in October. "Given the uncertainties facing the global economy, the outlook for [the region] is subject to significant risks," the bank said. "A significant slowdown in China, though unlikely, would exert significant spillovers, particularly on commodity exporters."
Customs bureau spokesman Huang Songping told a press conference in Beijing the global economy was still undergoing "deep corrections" in the aftermath of the global financial crisis. "The recovery has remained sluggish," Huang said.
Forty-four per cent of 3,000 exporters in a bureau survey said new orders had fallen almost every month since October, Huang said.
Weak imports suggested that first-quarter gross domestic product growth may have cooled to 6.9 per cent, one of the lowest in six years, according to ANZ Bank economist Liu Li-Gang. The economy expanded 7.3 per cent in the final quarter of last year. "While the sharp slowdown in export growth could be due to a front-loading effect before the Lunar New Year, the overall China trade growth has been sluggish", Liu said.
But SWS Research senior analyst Meng Xiangjuan said she wouldn't be overly pessimistic about the trade decline given the holiday. "It would get more worrying if it continues," Meng said.
The swing in the trade surplus may complicate the outlook for the yuan, analysts say, although People's Bank of China deputy governor Yi Gang told the Economy & Nation Weekly that he was confident the yuan would stay "basically stable".