uploads/2015/10/Movement-in-the-Conference-Boards-LEI-for-China-2015-10-011.jpg

Conference Board’s LEI Rose in August 2015 for China

By

Updated

The Conference Board

The Conference Board is a global, independent business membership and research association that publishes leading and composite economic indexes for various countries.

Article continues below advertisement

The Conference Board LEI (Leading Economic Indicator) for China aggregates six economic indicators that measure economic activity in China. They are:

  • total loans issued by financial institutions
  • Raw Materials Supply Index
  • manufacturing PMI supplier deliveries
  • Consumer Expectations Index
  • total floor space started
  • manufacturing PMI export orders

The Conference Board’s LEI

The Conference Board’s LEI for China rose by 1% in August, following a 0.90% rise in July.

The total loans issued by financial institutions and housing starts had the largest positive contribution to the index. In contrast, consumer sentiment, new export orders, and supplier delivery fell in August.

Also, the LEI’s six-month growth rate fell. This points to weakening economic conditions in the coming months.

Article continues below advertisement

The Conference Board CEI

The Conference Board CEI (Coincident Economic Index) for China measures the current economic activity. It rose by 0.80% in August, following a 1.10% rise in July.

Impact on mutual funds

With a rise in bank loans, the financial sector would benefit. Since all of the China-focused mutual funds in this review—namely the Clough China Fund – Class A (CHNAX), the Fidelity China Region Fund – Class C (FHKCX), the John Hancock Greater China Opportunities Fund – Class A (JCOAX), and the Matthews China Fund – Investor Class (MCHFX)—have more than 20% exposure to financial sector, they stand to gain.

However, with the fall in export orders and consumer sentiment, ADRs (American Depository Receipts) like CNOOC (CEO), Taiwan Semiconductor (TSM), and China Mobile (CHL) may have a negative impact.

Lower consumer sentiment means fewer orders from the local and export market. In turn, this leads to a fall in revenue. Ultimately, it impacts companies’ margins.

Advertisement

More From Market Realist