Weekly Market Recap
Chinese arithmetic
13/12/2021
Week in review
- RBA keeps cash rate at 0.1% in line with consensus
- Chinese CPI inflation 2.3% y/y
- Chinese loan growth 11.7% y/y softer than expected
Week ahead
- U.S. official policy rate and taper announcement
- Australia labour market report
- Australia business and consumer confidence
Thought of the week
Chinese equity markets are starting to claw back some of this year’s losses as investors’ attempt to decipher the impacts of regulatory change. However, the PBOC eased some policy measures last week and the government has lessened restrictions on the property market. The real estate sector will likely be a drag on growth, but the policy shifts in the last week signal a willingness to ensure economic growth targets remain within reach. A stable outlook, especially when it comes to the property market, may sway investors’ appetite for Chinese assets at a time when growth opportunities in developed markets are looking harder to come by. Valuations on equity markets globally have come down as earnings have rebounded. However, many EM equity markets, and China in particular, have relatively undemanding valuations. There may be ongoing policy risk associated with some sectors, but others such as renewables or consumer services may have a policy tailwind.
EM and Chinese valuations looking relatively attractive
Current P/E valuations compared to 15 year average
Source: Bloomberg, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Data reflect most recently available as of 10/12/21.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
0903c02a82467ab5