Stock market jitters over China’s recent economic targets were overdone, analysts and economists said yesterday, confident that the nation’s growth outlook and ability to cap inflation were positive for Australia.
China recently lowered its annual gross domestic product (GDP) growth target to 7.5 per cent from 8 per cent and also managed to keep inflation in check.
“Concerns about China’s 2012 growth target of ‘just’ 7.5 per cent are way overblown,” AMP Capital chief economist Shane Oliver said in a weekly note.
Oliver said China’s stated GDP targets were a minimum, not a ceiling, and added the country had beaten its own target every year since 2000 by at least 1 per cent a year.
“We continue to see Chinese growth this year of around 8 per cent,” he said, adding he saw no threat to the forecast.
Meanwhile, China said its inflation had fallen in February to 3.2 per cent, its lowest level in nearly two years, helping to quell investors’ concerns over economic overheating.
CommSec chief economist Craig James said China’s improved inflation rate was part of a good news story emanating from the global stage, including Greece being on the verge of a bond-swap deal, United States economic improvement and China’s sustainable growth path.
“Mining stocks are significantly undervalued and are likely to be targeted buys for investors in light of all the good big-picture economic news,” James said.
“Investors have maintained a ‘safety first’ approach to investing, but the improving global environment suggests that they now start to reassess [that] strategy.”
He said Beijing’s ability to reduce inflation gave scope for further easing of bank reserve requirements which, in turn, boded well for Australian resources stocks.
Fidelity Asia Fund portfolio manager David Urquhart noted China’s looser monetary policy was also a positive as reflected by foreign investors lifting the Hang Seng China Enterprise Index nearly 40 per cent in the five months to the end of February.
“China, now on a price-earnings ratio of 10.6 times as measured by the MSCI China Index, should be able to grow 7.5 per cent to 8 per cent during 2012,” Urquhart said.
“This market should trade closer to its five-year average of 12.8 times earnings as confidence returns over China’s ability to continue to deliver healthy economic growth.”
