China Investors Are More Confident Than the Real Economy

The earliest gauges of China’s economic pulse for October suggest that sentiment among financial-market participants is more positive than that in the real economy.

Confidence at smaller companies and manufacturing activity tracked by satellites both slipped from the level in previous month, and the mood among steel producers and traders slumped on production curbs. International financial market experts, meanwhile, are increasingly optimistic about the nation’s outlook, and sales managers’ expectations were little changed.

China concluded a twice-a-decade Communist Party Congress in October, with President Xi Jinping outlining a roadmap to make the country a global leading power by 2050 and put more emphasis on quality over pace of economic expansion. That evolving target may dial back the need for stimulus while allowing the government to be more resolute on curbing pollution, reducing industrial capacity and taming excessive borrowing.

The earliest October official indicator release, due on Tuesday, will see the manufacturing purchasing managers index edge down slightly to 52.0 from 52.4 in September, according to economists surveyed by Bloomberg as of early Monday.

Here are what the earliest private indicators show about the $11 trillion economy this month:

Smaller Businesses

Standard Chartered Plc’s Small and Medium Enterprise Confidence Index slipped to 55.2 this month from 56.2 in September, according to the bank’s survey of more than 500 companies. Three key sub-gauges tracking current performance, three-month expectations and credit conditions all eased.

“Weaker demand and supply-side disruption weighed on production activity,” Standard Chartered economists Shen Lan and Ding Shuang wrote in the report. “China’s environmental code has weighed on production, especially small-sized enterprises.”

Satellite View

Manufacturing also moderated, according to the China Satellite Manufacturing Index, which slipped to 51.08 from 51.69 last month. The gauge published by San Francisco-based SpaceKnow Inc. tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites.

Steel Mills

The S&P Global Platts China Steel Sentiment Index slumped to 33.61 this month from 60.87 in September. The gauge is based on a survey of 75 to 90 China-based market participants including traders and steel mills.

“Chinese steel market sentiment slumped in October amid uncertainty around the impact of Beijing’s mooted winter production cuts,” Paul Bartholomew, a senior managing editor at S&P in Melbourne, wrote in a report. “That uncertainty has been compounded this year by plans to lower steel production over the winter months, so there is more volatility than usual.”

Financial Experts

International financial market experts, meanwhile, are increasingly optimistic. A survey of the China Economic Panel — a joint project of the Centre for European Economic Research (ZEW) in Mannheim, Germany, and Fudan University in Shanghai — showed expectations for the next 12 months climbed to 17.3 this month from 8.3 in September.

“The outlook for the next 12 months has significantly improved,” Michael Schroeder, a senior researcher at ZEW, wrote in the statement. Retail and investment banking and the insurance sectors saw the strongest growth compared to the previous month.

Sales Managers

Sentiment among sales managers improved slightly. The manufacturing sector jumped to a 15-month high while that of the non-manufacturing sector slid, according to a survey by London-based World Economics Ltd. The overall gauge edged up to 51.9 in October from 51.7 last month.
Source: Bloomberg