Investment Clock insights

China a little better than expected, a lot better than feared

Trevor Greetham

19 October 2015

The big stock market slide this summer was caused by concerns that China's surprise currency devaluation was a response to something nasty in the woodshed. Today's numbers go some way to easing those concerns with GDP growth only a fraction of a percentage point below the government's 7% target as the economy rebalances away from industrial activity and towards consumer spending. 

The real motivation for de-pegging and devaluing against the US dollar was probably to protect China's exchange rate from further unwelcome strength against its international trading partners as US interest rates rise. Ironically, the market turbulence the Chinese policy shift triggered has itself caused the US Federal Reserve to stay its hand and it may lead to further stimulus in Europe and Asia.

We are positive on stocks. The global manufacturing sector remains under pressure and we don't rule out further downside risk in the near term but sentiment, seasonality and stimulus argue for a continued rally into year end. China is not imploding and nor is America raising rates.

The value of your investment and the income from it is not guaranteed and can fall as well as rise. This article is for professional customers only. The views expressed are the author’s own and do not constitute investment advice.