A mere two days after we last talked about the Chinese equity market, we are heading back there again for today's Major Market Move topic. China released Q4 GDP data earlier today which turned out to be better than expected (8.9% vs 8.7% expected). Not surprisingly, Chinese stocks reacted very favorably to the news. We track 13 Chinese equity indexes and they ended up being the top 13 performers out of all 321 equity indexes that we track globally.
The best performer overall was the Shenzhen G-Share index with a 5.1% gain. The G share index represents companies that the Chinese government is the process of transitioning from being government owned to shareholder owned. Even with today's gain, the G-Share index is still well off of its 2011 high (as are all the other Chinese equity indexes).
We're going to go back to the Chinese equity / GDP growth comparison chart that we also used two days ago.
We see that China's GDP is expected to grow another 150% over the next 4 years which means that they will have to average close to 11% growth per year. Right now the economy is slowing, (8.9% growth this quarter vs 9.1% last quarter), so in order to meet expectations for the next four years, they have to reverse the current trend and improve the GDP growth rate by close to 2%. Or, what I would consider the more likely possibility, estimates are going to have to be adjusted downwards.
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