Ghost Ships and Rate Cuts, China has Investors Scratching their Heads (FXI)
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On Thursday, the People's Bank of China cut rates by 0.31 percent. The timing of the move was a surprise to many investors who had not expected a cut from the bank so soon after June's rate cut.
Rate cuts are generally seen as a positive for global markets, but today's move is forcing investors to take a keen look at the data in China. The question on everyone's mind is this: Is China's rate cut related to lower inflation in the country or are economic conditions there really as bad as some fear.
Analyst at CBB International provided Bloomberg with a report today which they are calling the China Beige Book. According to their report, China's official statistics might be lagging behind independent data that showed a pickup last quarter.
"These findings diverge considerably from the current 'gloom and doom' narratives," CBB President Leland R. Miller and Craig Charney, director of research and polling, said in a statement to Bloomberg. The analysts think the official statistic in China probably lag CBB's data by one to three months and could pick up this summer. Others aren't so sure.
Most analysts think China's economic growth slowed further in the second quarter to 7.6 percent, which would be China's worse performance since the 2008 financial crisis, with most key sectors in the economy losing steam.
Other reports today say that China has a huge fleet of 'ghost ships' which are now roaming the water in other parts of Asia searching for cargo. This would be a very negative sign for China's economy. If true, China's 31 basis point cut could be like shooting a grizzly bear with a pellet gun.
iShares FTSE/Xinhua China 25 Index ETF (NYSE: FXI) was trading lower by 0.61 percent in early trading on Monday.
Rate cuts are generally seen as a positive for global markets, but today's move is forcing investors to take a keen look at the data in China. The question on everyone's mind is this: Is China's rate cut related to lower inflation in the country or are economic conditions there really as bad as some fear.
Analyst at CBB International provided Bloomberg with a report today which they are calling the China Beige Book. According to their report, China's official statistics might be lagging behind independent data that showed a pickup last quarter.
"These findings diverge considerably from the current 'gloom and doom' narratives," CBB President Leland R. Miller and Craig Charney, director of research and polling, said in a statement to Bloomberg. The analysts think the official statistic in China probably lag CBB's data by one to three months and could pick up this summer. Others aren't so sure.
Most analysts think China's economic growth slowed further in the second quarter to 7.6 percent, which would be China's worse performance since the 2008 financial crisis, with most key sectors in the economy losing steam.
Other reports today say that China has a huge fleet of 'ghost ships' which are now roaming the water in other parts of Asia searching for cargo. This would be a very negative sign for China's economy. If true, China's 31 basis point cut could be like shooting a grizzly bear with a pellet gun.
iShares FTSE/Xinhua China 25 Index ETF (NYSE: FXI) was trading lower by 0.61 percent in early trading on Monday.
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