China’s MNI Business Sentiment Indicator fell
The MNI China Business Sentiment Indicator is a leading indicator. It measures China’s current business sentiment and future expectations for the economy. A reading above 50 indicates that the business sentiment is growing. A reading under that mark suggests that business confidence is falling.
China’s MNI Business Sentiment Indicator fell to 52.3 in January from 52.7 in December. Although the overall indicator fell, production and new orders rose in January. Firms revised their expectations down for the future. The Future Expectations Indicator fell by 0.9% to 52.6 in January.
Firms benefited from the yuan’s recent depreciation. Lower interest rates helped the firms. Their interest burden fell more in January to the lowest level since March 2009. The Availability of Credit Indicator rose slightly. Meanwhile, disinflationary pressures intensified. The Prices Received Indicator was below the breakeven level of 50 for the 18th consecutive month. It was 41.6 in January.
According to Philip Uglo, MNI Indicators’ chief economist, “Volatility in financial markets has once again centred attention on China with a renewed lack of confidence in the ability of Chinese policymakers to contain some of the growing risks including capital outflows.”
Impact on mutual funds
A rise in credit and lower interest cost are positive news for the overall business community. It would allow them to grow.
Similarly, a rise in production and new orders could lead to an increase in companies’ revenue like Tencent Holdings (TCEHY), China Mobile (CHL), and Taiwan Semiconductor Manufacturing (TSM). China-focused mutual funds like the Clough China Fund – Class A (CHNAX), the Guinness Atkinson China & Hong Kong Fund (ICHKX), and the RS China Fund – Class A (RSCHX) are invested in the companies mentioned above. Their performance could be impacted negatively.
In the next part, we’ll analyze the Westpac MNI Consumer Sentiment Indicator.