China: Trade data suggests more fiscal stimulus on the way – Nomura

By FXStreet FXStreet (Delhi) – Research Team at Nomura, suggests that the recent Chinese trade data has indicated continued fall in exports in August with no external demand recovery which may result in more fiscal stimulus in H2 especially to boost infrastructure investment.

Key Quotes

“Export growth in USD value terms fell by 5.5% y-o-y in August but was less of a decline than July’s 8.3% and slightly better than expected (Consensus: -6.6%; Nomura: -7.0%; Figure 1).”

“The contraction in imports tumbled to -13.8% y-o-y in August from -8.1% in July, much worse than expected (Consensus: -7.9%; Nomura: -10.0%). As a result, the trade surplus widened significantly to USD60.2bn from USD43.0bn in July, close to the record-high marked in February.”

“The decline in international commodity prices has also put more downside pressure on China imports in Q4. However, if commodity prices remain at current low levels (let alone slide further), the average price deflation would be around 40% y-o-y in Q4, which would remain a significant drag on imports.”

“The weakness of this data suggests growth momentum remains soft. We expect more fiscal stimulus in H2, especially to boost infrastructure investment. Moreover, we expect one more 50bp reserve requirement ratio cut in Q4 and possible liquidity …read more

Source:: FX Street