15.12.25 - Weaker signs in China
China’s economic data for November confirmed a further loss of momentum. Overall, consumption, investment and industrial output all undershot expectations:
Retail sales rose just 1.3% year-on-year, easing sharply from October and missing market expectations of 2.9%. This marks the slowest annual increase since December 2022, despite ongoing consumer subsidy programs from Beijing.
Industrial production increased 4.8% YoY, below expectations for a 5.0% rise and the weakest growth since August 2024.
Fixed-asset investment contracted 2.6% over the January–November period, highlighting continued weakness in private investment and confidence.
Markets: Lately, the rally in China and Hong Kong struggled to gain traction amid disappointing macro data.
My View: China has significant policy capacity if stimulus becomes necessary, and Beijing clearly understands the need to rebalance growth, strengthen household consumption and lift productivity. Structurally, China remains the second-largest economy globally and a leader across multiple sectors, including technology and industrial manufacturing.
In a broader global market correction, China is unlikely to decouple and would probably act as a drag rather than a safe haven.
Against this backdrop, I have trimmed exposure to China-related equities, particularly taking profit in larger positions such as Alibaba, Baidu, PDD and Prosus. For now, I prefer to hold a higher cash level and wait for more attractive entry points and clearer policy signals before reallocating capital into this region.
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