“There is a growing perception that China has seen the worst of its soft growth patch, notwithstanding the release of trade data which indicated a weaker than expected domestic demand component,” he said. “Sales reports following Golden Week holidays in China have added to our confidence that the trajectory in economic activity is rebounding from weakness in Q3 and we believe that the bounce in sentiment in emerging markets at the start of October has further to run,” Dowding added.
Russell Investments senior investment strategist Wouter Sturkenboom was somewhat welcoming of developments but sounded a note of caution.
“The benign headline Q3 GDP number for China, released today, is consistent with our soft landing hypothesis although it challenges us to believe the entire Chinese economy really is growing this fast in the quarter following the share market melt-down,” he said. “Indeed, the magnitude of today’s numbers look out of line with more “high visibility” partial indicators, and the shift from fixed capital investment driven growth to consumer driven growth is still a challenging transition.”
“Slowing growth in the wake of a long period of debt-expansion are always a warning sign,”Sturkenboom added. “Indeed, it’s not what we know about China that holds us back from a more positive stance, it’s what we don’t know, viz, just how and where latent bad debt risk might surface in the wake of the share market collapse.”
