China Delivers A Chill Warning As World Central Banks Continue The Freeze

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<ul><li>After staging a recovery in March and stabilizing in April the MNI China Consumer Sentiment Indicator (CSI) fell in May to a level of 114.2.</li><li>While the CSI has stagnated at depressed levels since early 2014, alternate measures of consumer sentiment in China indicate the economy is growing in line with its potential.</li><li>As it becomes increasingly apparent that China’s economy is doing just fine, global Investor Sentiment towards China can be expected to improve substantially as the consensus view towards China converges with reality.</li><li>A recovery in investor sentiment towards China can be expected to trigger a large ‘risk-on’ rally in global equity markets. While we see upside potential for China’s stock market, stock markets in EMs most exposed to our ‘key risk factors’ have the most upside potential.</li><li>In line with our expectations China’s policy makers have come under increasing pressure to shift their policy stance back towards deleveraging following the flare up in concerns over misplaced stimulus. As a result sectors of China’s ‘old economy’ have started to underperform sectors of China’s ‘new economy’.</li><li>Going forward we expected sectors of China’s ‘new economy’ to continue to outperform sectors of China’s ‘old economy’ as the government comes under continued pressure to focus on deleveraging.</li></ul>

After staging a recovery in March and stabilizing in April the MNI China Consumer Sentiment Indicator (CSI) fell in May to a level of 114.2.While the CSI has stagnated at depressed levels since early 2014, alternate measures of consumer sentiment in China indicate the economy is growing in line with its potential.As it becomes increasingly apparent that China’s economy is doing just fine, global Investor Sentiment towards China can be expected to improve substantially as the consensus view towards China converges with reality.A recovery in investor sentiment towards China can be expected to trigger a large ‘risk-on’ rally in global equity markets. While we see upside potential for China’s stock market, stock markets in EMs most exposed to our ‘key risk factors’ have the most upside potential.In line with our expectations China’s policy makers have come under increasing pressure to shift their policy stance back towards deleveraging following the flare up in concerns over misplaced stimulus. As a result sectors of China’s ‘old economy’ have started to underperform sectors of China’s ‘new economy’.Going forward we expected sectors of China’s ‘new economy’ to continue to outperform sectors of China’s ‘old economy’ as the government comes under continued pressure to focus on deleveraging.

Recovery in Global Sentiment Towards China To Trigger Global Risk on Rally