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China’s August macro data sent mixed signals to markets as industrial production (IP) and retail sales growth rose slightly to 6.1% and 9.0% y-o-y, respectively, in August, while fixed asset investment (FAI) growth was down slightly to 5.3% y-o-y ytd in August from 5.5% in July, explains the research team at Nomura.

Key Quotes

“Property investment growth slowed to 9.3% y-o-y in August from 13.2% in July. Despite the rebound of IP and retails sales growth, we believe China’s overall economy continues to slow, and this could worsen in coming months.”

“Although Beijing appears determined to unwind its deleveraging efforts and start a new round of policy easing, we think there is much less room for policy stimulus than during previous easing cycles.”

“Export growth could decline sharply in coming months due to a possible escalation of US-China trade tensions, the fallout of some EM economies and the end of front-loading.”

“We expect more policy easing measures in coming months, such as leaving rates unchanged amid expected Fed rate hikes in late September and a RRR cut before year-end.”

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