Disappointing PMI of China was seemingly to suggest a slow down of Asia’s rebound after the financial tsunamni. In fact, when you digged deeper into the data, you will just want to laugh at the Bears. The figures published in this month is the reflective of the earthquake in Japan during March. According to the recent release of IMF Regional Economic Outlook for Asia, the Export and Import linkage between China and Japan composed of 27% of the Asia Region’s intermediate trade flow. Suffucation of Japan due to its earthquake, followed by downward adjustment of Japan’s GDP, would poised a significant decrease on China’s PMI data. Due to the highest weight of electronic industry (10% of total sample size) of China’s PMI estimate, any headwind of the electronic industry would create a visible drop of PMI.
PMI apart, let’s look at the fundamental of Asia. Where is the consumer sentiment? In short, the market is coming back. Forget about the commodity price drop, it’s a lagging indicator of the consumption and industrical production. The key driver of Asia’s growth is still export to Europe and US. Perpherical Europe nowadays are under immense refinancing pressure of the government bonds. It was estimated that the amount would be peaked at summer this year. After the hilly top, here comes the Christmas order in Autum and “unexpectedly” strike of cold weather(which occurs some where out there every year). It is not non-sense to believe Europe’s comeback in the 2H of 2011. US market is bullish as well, let’s look at the housing sentiment. S&P Case-Shiller 20-City Home Price Index has the median of 146, with the current value of 141 and was between 140-150 throughout the whole 2010. This year, no doubt, would oscillate around the median. When swinging back to the median, consumption power of the super-hero would be revived. Therefore, the only drepressing factor of Asia would only be Europe till this end of Summer.
In light of my economic forcast, on Commodity, recommend the traditional oil at USD 130+ at Q3. On the equity side, recommend Esprit, a HK based company with European income. Weak USD valuation and potential comeback of EUR would add benefit at the HK-based firm, whose company’s current is USD-pegged HKD.
If you are thinking about leaving Asia, don’t be an April fool.
Fed Watch
Cooling in Asia?
Disappointing PMI of China was seemingly to suggest a slow down of Asia’s rebound after the financial tsunamni. In fact, when you digged deeper into the data, you will just want to laugh at the Bears. The figures published in this month is the reflective of the earthquake in Japan during March. According to the recent release of IMF Regional Economic Outlook for Asia, the Export and Import linkage between China and Japan composed of 27% of the Asia Region’s intermediate trade flow. Suffucation of Japan due to its earthquake, followed by downward adjustment of Japan’s GDP, would poised a significant decrease on China’s PMI data. Due to the highest weight of electronic industry (10% of total sample size) of China’s PMI estimate, any headwind of the electronic industry would create a visible drop of PMI.
PMI apart, let’s look at the fundamental of Asia. Where is the consumer sentiment? In short, the market is coming back. Forget about the commodity price drop, it’s a lagging indicator of the consumption and industrical production. The key driver of Asia’s growth is still export to Europe and US. Perpherical Europe nowadays are under immense refinancing pressure of the government bonds. It was estimated that the amount would be peaked at summer this year. After the hilly top, here comes the Christmas order in Autum and “unexpectedly” strike of cold weather(which occurs some where out there every year). It is not non-sense to believe Europe’s comeback in the 2H of 2011. US market is bullish as well, let’s look at the housing sentiment. S&P Case-Shiller 20-City Home Price Index has the median of 146, with the current value of 141 and was between 140-150 throughout the whole 2010. This year, no doubt, would oscillate around the median. When swinging back to the median, consumption power of the super-hero would be revived. Therefore, the only drepressing factor of Asia would only be Europe till this end of Summer.
In light of my economic forcast, on Commodity, recommend the traditional oil at USD 130+ at Q3. On the equity side, recommend Esprit, a HK based company with European income. Weak USD valuation and potential comeback of EUR would add benefit at the HK-based firm, whose company’s current is USD-pegged HKD.
If you are thinking about leaving Asia, don’t be an April fool.
About APAC-ian
APAC-ian is an analyst on the ground of Asia, he contributed through data-driven analysis. Loyal to the facts.