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| Red October: Marko Ramius (Photo credit: Joriel "Joz" Jimenez) |
The uptick in key economic activity indicators last month, after signs of a rebound emerged in September data, cemented the view of many analysts and investors that China's rebound was now gathering momentum thanks to a raft of pro-growth policies rolled out by the government in recent months.
"It's pretty clear that there is no hard landing risk, that the economy will improve in the fourth quarter and we're going to see 9 percent year-on-year growth in the first half of next year," Dariusz Kowalczyk, senior economist and strategist for non-Japan Asia, Credit Agricole CIB, told Reuters.
That's a bold call on growth after seven successive quarters of slowing activity dragged the annual rate of economic expansion down to 7.4 percent in Q3 - its lowest since early 2009 - leaving the world's second biggest economy on track to mark its most sluggish year since 1999.
GRAPHIC-China inflation: http://link.reuters.com/vup83t
The benchmark Reuters poll taken in October after Q3 GDP data forecasts first half growth in 2013 of 7.8 percent, but Kowalczyk is not alone in being above consensus - and being further convinced that October's numbers are a turning point.
"The key question for investors is whether China's economic growth has truly bottomed out," Ting Lu, chief China economist at Bank of America/Merrill Lynch in Hong Kong, wrote in a note to clients.
"Based on October data, especially the 9.6 percent industrial production growth reading, the answer is firmly 'yes'," said Lu, who expects China's GDP growth to run at an 8.3 percent pace in the first half of 2013, picking up from a 7.8 percent rate in Q4.
Risk assets were somewhat less emphatic in their response to numbers that showed upside surprises in industrial output, fixed asset investment - up 20.7 in the first 10 months of the year - and retail sales, up 14.5 percent in October on the year.
While Asian currencies were broadly steady to firmer and Brent crude and base metals nudged higher, equities were subdued by worries about the risks from the so-called "fiscal cliff" in the United States and fresh concerns about sovereign debt problems in Europe.
"Equities in China are highly correlated with the economic cycle in and I strongly believe that the economic cycle in China justifies higher valuations going forward," Kowalczyk said.
BASE EFFECTS FLATTER
Lu meanwhile cautioned that there is risk of a strong base effect flattering the H1 numbers next year, but points out that infrastructure investment has accelerated solidly since the government began fast-tracking major projects a few months ago, underpinning domestic economic activity.
Lu says total planned investment in newly started projects, a leading indicator of FAI, accelerated to 35.2 percent year-on-year in October from 31.3 percent in September.
Despite signs of strength, analysts broadly say that further gains depend largely on the government maintaining its commitment to pro-growth monetary and fiscal policies, even though few economists expect additional action in the near term.
"I don't expect any easing in monetary policy until the end of this year because it would be unnecessary as the economy is recovering," Yao Wei, China economist at Societe Generale in Hong Kong, told Reuters.
Beijing has been fine-tuning economic policy for a year to support growth, and analysts expect that programme to broadly remain in place after a new leadership of the ruling Communist Party is unveiled at a congress that began on Thursday.
Outgoing party chief, President Hu Jintao - almost certain to be succeeded by Vice President Xi Jinping - said in a speech to the congress that China would stick to policies fostering sustainable, long-term economic development with the aim of doubling GDP over the 10 years to 2020. ... Continue to read.
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