X
<

China’s Foreign Trade Drops: Impact on China-Focused Mutual Funds

PART:
1 2 3 4 5
Part 5
China’s Foreign Trade Drops: Impact on China-Focused Mutual Funds PART 5 OF 5

China’s PPI Data Indicate Continued Deflationary Pressure

China’s CPI data

In November, China’s CPI (consumer price index) rose 1.5% YoY (year-over-year). This was mainly due to higher food prices and not due to an improvement in economic activity. In November, food prices rose by 2.3%, and nonfood prices rose by 1.1%. The rise in CPI indicates that local consumer demand is slowly strengthening, which is a step toward the transition to a consumer-driven economy from an export-driven one. On average, from January to November, overall consumer prices rose by 1.4% on a YoY basis.

China’s PPI Data Indicate Continued Deflationary Pressure

Interested in JD? Don't miss the next report.

Receive e-mail alerts for new research on JD

Success! You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success! has been added to your Ticker Alerts.

Success! has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

China’s PPI data

In November, the PPI (producer price index) for manufactured goods fell 5.9% YoY as manufacturers resorted to price cutting due to weak demand. The decline in PPI has remained unchanged since August 2015. The PPI for manufactured goods consists of the producer price index and the purchaser price index.

The deflationary trend is continuing in the manufacturing sector, which is disturbing. Because lower prices mean lower profits for factories, it becomes difficult for manufacturers to run their business for a longer time with shrinking margins. Also, with the fall of commodities such as oil and steel, manufacturers are forced to further reduce their selling prices.

Impact on mutual funds

PPI data point out sluggish local demand in the manufacturing sector. As a result, raw material costs continue to fall, which adversely affects companies operating in China. This also affects mutual funds such as the Clough China Fund Class A (CHNAX), the Guinness Atkinson China and Hong Kong Fund (ICHKX), the Eaton Vance Greater China Growth Fund Class A (EVCGX), and the John Hancock Greater China Opportunities Fund Class A (JCOAX).

The rise in consumer demand is good for the consumer discretionary sector, including consumer discretionary companies like Jumei International Holding (JMEI), Qunar Cayman Islands (QUNR), Ctrip.com International (CTRP), and JD.com (JD).

For more analysis on mutual funds, please visit MR’s Mutual Funds page.

X

Please select a profession that best describes you: