China data: The good and the bad; US fundamentals don't support a near-term rate hike

Marcus Ashworth, Head of Fixed Income at Haitong Securities, joined Tip TV in today’s Finance Show to speak on the Chinese economy, stocks, and the Federal Reserve rate hike.

China remains a work in progress

Ashworth speaks on the Chinese data release, noting that there is both good and bad news. He highlights the risk of Chinese authorities lowering their GDP target ahead.

On the question whether the Chinese action of trickling down money to consumers is working, Ashworth answers that the authorities are doing their best and assuring the markets that they are there to give money supply support.

While he remains sceptic on the recent GDP release, Ashworth believes the economy is a work in progress.

Global growth: Reliance on China is changing

Ashworth speaks on the shift in EM from a mortgage trap to a consumption economy. He further highlights how the soft Chinese trade data will hurt other economies on supply concerns.

He adds how the impact of Chinese growth on global GDP is less when compared to previous years.

Fed communication will shift to domestic economy, but uncertainty remains

Ashworth notes that with the Chinese situation stabilising, the Fed will be compelled to shift to the domestic economy in its communication ahead, and with the outlook for US economy remaining dim, further uncertainty can be expected on the rate hike outlook.

The doves in the FOMC have spoken how the US is not showing any real signs on growth and they believes that Yellen should hold the rate liftoff program back for the time being.

China stocks: End to the fall?

On Chinese stock market, Ashworth says that it’s not necessarily a rigged market, but remains less open. Although further downside potential for stocks has been taken out by the actions of the PBoC, the fundamental scenario of China doesn’t look good.

He believes that a small upside trickle might be seen in the Chinese equity space, but it doesn’t remain a massive bull case.