"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 26 January: China reports January scale of operations and interest rate under the medium-term lending facility (MLF)
• 27 January: China reports December profits of industrial enterprises above the designated size
• 27 January: Hong Kong reports December external merchandise trade statistics
• 30 January: China reports Q4 Business Revenue of Enterprises Above the Designated Size Engaged in Culture and Related Industries
• 30 January: Taiwan reports Q4 and full-year 2025 GDP estimate
• 30 January: Hong Kong reports Q4 and full-year 2025 GDP estimate
• 31 January: China reports January industrial Purchasing Managers’ Index (PMI) data

The pace of major economic data releases returns to normal as we enter the final stretch of January, with critical figures for 2025 set to be published.

Purchasing Managers’ Index (PMI) readings are expected to remain in expansionary territory for mainland China. The Emerging Industries PMI (EPMI), a leading indicator for overall production, rose by 0.9 points month-on-month to 50.0 in January. Historical data during years with a later date for the Lunar New Year – such as 2015, 2018, and 2024 – have showed mixed outcomes, with January EPMI weakening in 2015 but rising in 2018 and 2024, with an average increase of 0.8 points. The January figure broadly aligns with this seasonal trend, with this year’s celebration set on 17 February. Sectoral momentum remains steady, with three of the seven sub-industries in expansion. High-frequency data from the first half of January show mixed movements across traditional industries, with declines in average operating rates recorded for petroleum asphalt facilities, tire production, and Shandong independent oil refiners. Meanwhile, blast furnace utilization, polyester filament weaving in Jiangsu-Zhejiang, and PVC operating rates edged higher. Overall, January’s high-frequency indicators suggest stability, with port activity remaining strong while construction and real estate data continue to lag.

Industrial profit growth for January-December 2025 is expected at 0 per cent year-on-year. From January to November, profits edged up by 0.1 per cent to RMB 6.63 trillion (USD 950 billion), sharply lower than the 1.9 per cent growth recorded in the first 10 months, although still marking the fourth consecutive monthly increase since August. The slowdown highlights weak yearend demand and persistent cost pressures, which will keep profits flat versus 2024. State-owned enterprises saw profits decline by 1.6 per cent after holding flat previously, while private firms slipped by 0.1 per cent to reverse a 0.9 per cent earlier gain. Foreign-invested enterprises, including those backed by Hong Kong, Macau, and Taiwan, also lost momentum, with growth easing to 2.4 per cent from 3.5 per cent. Despite fluctuations, overall profit growth remains stuck near zero, underscoring the ongoing challenge of revenue without profit.

In monetary conditions, January’s liquidity pressures stemmed mainly from RMB 2.95 trillion (USD 423 billion) in maturing open market operations. Additional factors such as government bond payments, credit issuances, tax collections, and seasonal cash withdrawals ahead of the Lunar New Year added to concerns of a temporary tightening. However, the central bank’s RMB 1.1 trillion (USD 158 billion) outright reverse repo operations provided ample support, keeping liquidity broadly balanced. Systemic money supply tightening is unlikely, and funding rates are expected to follow their usual seasonal decline after yearend.

Equity markets were mixed over the past week. As of Thursday, 22 January, the MSCI China Index fell by 1.01 per cent, while the Shanghai Composite rose by 0.5 per cent. The Shenzhen Component gained 0.32 per cent, while the ChiNext Index slipped by 0.96 per cent. Mid-cap stocks outperformed both small- and large-cap peers, with growth names continuing to lead value counterparts. With listed companies intensively releasing 2025 earnings previews, investor focus is shifting back towards fundamentals. Corporate earnings are set to become the dominant driver in the near term. The market may undergo a round of structural adjustments centered on fundamentals, likely entering a short-term consolidation phase.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.

Indholdet er udarbejdet sammen med vores samarbejdspartner, men repræsenterer vores egne holdninger og vurderinger. Indholdet skal udelukkende opfattes som af informativ karakter, og ikke som en opfordring, eller anbefaling, til at købe eller sælge værdipapirer eller andre finansielle instrumenter.

Indholdet er også offentliggjort på app'en Lundgreen's Investor Insights, som kan downloades gratis. Her finder man meget andet spændende content, bl.a. også vores egen podcast.