Industrial production in line with expectations
According to the National Bureau of Statistics, in China, the production of industrial enterprises above designated size grew by 6.2% year-over-year (or YoY), up from the 6.0% growth recorded in the previous month. The strengthening of industrial production and the upbeat GDP data paint a positive picture for the Chinese economy in the near term. Enterprises above designated size are all industrial enterprises with revenue of over 20 million Chinese yuan from their principal business.
From January to June 2016, the total value added of industrial enterprises above designated size was up by 6.0% YoY. Industrial production increased by 0.47% in June and 0.45% in May.
Industrial production rose amid a recovery in the real estate sector and an increase in government spending on infrastructure projects. However, declining private sector investments have raised concerns about the medium-term prospects of the country.
Impact on funds
The rise in factory output is positive for companies such as Freeport-McMoRan (FCX), Glencore (GLNCY), Alcoa (AA), Taiwan Semiconductor Manufacturing Company (TSM), Sinopec (SNP), and Rio Tinto (RIO), as it could boost their revenues.
Similarly, it could boost the performance of funds such as Oberweis China Opportunities Fund (OBCHX), the Matthews China Fund Investor Class (MCHFX), the iShares China Large-Cap ETF (FXI), and the iShares MSCI Hong Kong ETF (EWH), which have a sizable exposure to the industrial sector. In the next part of this series, we’ll look at China’s fixed asset investments in June.