- Today, China released its first-quarter GDP numbers. The world’s second-largest economy contracted 6.8% year-over-year in the first quarter. The fall was higher than expected.
- Meanwhile, Chinese stock markets were subdued today considering the spike in some of the other Asian markets. The Shanghai Index gained 0.66% today and underperformed other Asian markets.
Shanghai Index today
The Shanghai Index gained 0.66% today. Looking at other Asian markets, India’s Nifty 50, Japan’s Nikkei 225, and South Korea’s KOSPI gained 3.2%, 3.2%, and 3.1%, respectively, today. Chinese stock markets underperformed other Asian markets. US stock markets should open higher based on the activity in the Dow Jones (NYSEARCA:DIA) and the S&P 500 (NYSEARCA:SPY) futures. On a year-to-date basis, Chinese stock markets have outperformed most global stock markets, which might sound counterintuitive since the deadly virus originated in China.
China’s Q1 GDP miss
Today, China released its first-quarter GDP data. The data showed that the economy fell by 6.8% in the first quarter. A Reuters poll suggested that China’s first-quarter GDP would fall 6.5%—the worst reading since 1992 when the country started to provide quarterly numbers. Even in the US, most economic indicators are at multiyear lows. According to Goldman Sachs, the GDP in advanced economies could fall 35% in the second quarter. So, the 6.8% contraction in China’s first-quarter GDP isn’t too bad. Notably, the Shanghai Index has recouped most of its losses. The index has only fallen 7.0% year-to-date. The Dow Jones index has fallen 17.5% during this period.
Chinese stock markets
While the Shanghai Index is among the best performing stock markets this year, it was the worst performer in the last decade. The Shanghai Index is still trading below its 2007 highs. In 2018 and 2019, the US-China trade war compounded China’s slowdown. While the US and China agreed to phase one of the trade deal earlier this year, watch out for a more intense US-China rivalry after the pandemic eases. The relations with China could form the center stage of President Trump’s 2020 campaign.
There’s palpable anger towards China in many countries. Some US companies considered shifting at least some of their operations from China amid the US-China trade war. After the pandemic is over and the dust settles, more companies might rethink their overreliance on China for supply lines.