Economic Update
2017/04/10Manufacturing Activities Making Headway
The recent release of the official Manufacturing Purchasing Managers’ Index (PMI) in Mainland China showed that sentiment among frontline managers has been improving. Broadly recognised as one of the most symptomatic leading indicators to gauge the performance of the Chinese economy, this result confirms our view that we should see stable growth in 2017.
2017/03/16Thoughts on the Second Interest Rate Hike in Three Months
As we had anticipated, the U.S. Federal Reserve (Fed) raised the Fed funds target range up by a notch, i.e. 25bps, overnight. This change means the upper and lower boundaries of the Fed funds target rate are 1% and 0.75% respectively (see Chart 1). At the same time, the Fed funds rate will likely reach around 0.8% in the near term, which will be the highest level since October 2008. As the Fed has raised the interest rate twice in the last three months, does this signal a faster pace of rate hike? Does this justify a change to our call of two rate hikes in 2017?
2017/03/01An Early Stage of Turnaround in the Mainland’s Credit Environment
After going through years of eruption, the growth of non-performing loans (NPLs) in Mainland commercial banks is showing signs of winding down (see Chart 1). In the fourth quarter of 2016, NPLs only grew 18.7% YoY, the slowest growth rate since 3Q2013. The slower growth of NPL could be attributable to an observably higher comparable base and the improving economic environment.
2017/02/27Faster Pace of Rate Hikes in the Pipeline?
In the Semi-annual Monetary Policy Report submitted to Congress and the U.S. House of Representatives, Federal Reserve (Fed) Chairman Janet Yellen hinted that “several” interest rate hikes would be increasingly likely in 2017.
2017/02/01Warm Winter Weather Melting Businesses
The news that a few of my favourite restaurants will be going out of business soon made me disheartened. Afterwards, when I took a stroll in some key commercial districts on the Island and saw sparse customer traffic in popular stores despite the deep discounts on offer, our conservative forecast about the Hong Kong economy seems to be turning out to be true.
2017/01/13Less Expansionary Monetary Policy Expected In the Mainland
After ending a streak of year-on-year (YoY) declines in September 2016 (see Chart 1), produce prices continued to pick up at an accelerated pace in December 2016 in the Mainland. Producer Price Index (PPI) jumped 5.5% YoY in December, compared to 3.3% in November and the 1.5% average over the past three months. During the period, prices of materials (e.g. steel, rubber, copper) all saw double-digit YoY increases (see Chart 2), explaining the notable up-swing of the PPI.
2016/12/23Cautious Outlook Despite Improving Economic Data
The recent set of data released by the Census and Statistics Department showed that both the employment market and inflation have remained stable.
2016/12/15Faster Pace of Rate Hike May Strengthen HKD
Overnight, the Federal Open Market Committee (FOMC) announced it would raise the target range for the Federal Funds Rate to 0.5-0.75%. In addition, members of the FOMC indicated a tendency to raise interest rates at a faster pace compared to three months ago (see Table 1). We have taken this opportunity to elaborate our view of the economy and how it may be impacted by the rate hike.
2016/11/30The Recalibration of Interest Rates in the U.S.
Uncertainty has remained high in the post-U.S. election era, both in Hong Kong and abroad. At the same time, with the stable job market performance in the US, it is becoming clearer that interest rates will be moving upwards in the near term and onwards. Let’s look at how Hong Kong might be affected.
2016/10/20Chinese Domestic Economy Continued to Stabilise
The Chinese economy continued to show stabilised growth in the third quarter as real GDP grew 6.7% year-on-year (YoY), in line with the pattern in the first half.
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