Growth is likely to continue moderating as Chinese authorities slow credit growth, and the reduction in new floor construction in the March quarter GDP result confirms that tighter credit conditions are having an effect and that housing investment is likely to further slow, according to Perpetual’s head of investment market research, Matt Sherwood.
“Chinese government moves to support growth through infrastructure spending in railways and some modest tax cuts are cushioning the impact, but it is unlikely that there be more government stimuli or monetary policy easing unless growth moderates more,” Mr Sherwood said.
“While a Chinese growth moderation three years ago may have sparked a sharp market reaction, in the current market climate improvements in the US and Europe (which combined are nearly four times bigger than China) are keeping investor optimism intact, but investors need to remain wary about elevated valuations as there is never a good time to overpay for an asset,” he said.
Weak April manufacturing data received a lot of attention last week, Mr Sherwood said, noting that poor PMI figures were reason enough for global investors to take profits last Wednesday from a six-day rally.
“While the index – at 48.3 per cent – was in line with expectations, the result weighed on Chinese regional sentiment as it confirmed that activity remained in contraction territory, but the spill-over into other markets was limited,” he said.
