China market round-up: Singles’ Day sales break record, IP and credit growth under pressure, StanChart’s RMB internationalisation index hits new high
In this round-up, Alibaba Group Holding’s Singles’ Day sales hit a record high, industrial production growth and credit growth both slowed in October and Standard Chartered’s Renminbi Globalisation Index reached a year-to-date high.
Sales volume across Alibaba’s online shopping platforms hit Rmb10bn ($1.42bn) in one minute and 36 seconds after midnight on November 11, or Singles’ Day as the e-commerce giant calls it.
Alibaba recorded gross merchandise value of Rmb268.4bn at the end of the day, setting a new record. However, Alibaba’s co-founder Jack Ma said the numbers were below his expectations.
“There are multiple reasons, one of them is that the weather is too hot,” Ma said at the fifth World Zhejiang Entrepreneurs Convention on Wednesday. “Clothes sell better when it’s cold. Another reason is that [the sale was held on a] Monday.”
Industrial production (IP) expanded by 4.7% year-on-year in October, down from the 5.8% growth in September, according to data from the National Bureau of Statistics.
Fixed asset investment and retail sales grew by 5.2% and 7.2% respectively in October, down from 5.4% and 7.8% respectively the month before.
“We believe these readings could exert downward pressure on RMB,” Ting Lu, chief China economist at Nomura, wrote in a Thursday note. “In our view, Beijing faces the dilemma of a worsening growth slowdown amid a rapid rise in CPI inflation, but worsening growth prospects will likely push Beijing to do more to support growth.”
Considering the worsening activity data, Nomura now predicts a medium-lending facility rate cut in the next few months instead of after spring next year, as it originally predicted.
Credit growth also slowed in October.
According to data published by the People’s Bank of China, for the first 10 months this year, aggregate financing grew by 10.7% year-on-year. This is 0.1 percentage point down from the 10.8% growth in the first nine months.
In October alone, new renminbi-denominated loans reached Rmb661.3bn, a 12.5% year-on-year growth, up 0.1 percentage point from September's 12.4% growth. Total social financing increased by Rmb619bn in October, less than the increase of Rmb737bn last October.
“Money and credit data moderated in October, with both bank and non-bank credit growth notably below expectations,” Yu Song, an economist at Goldman Sachs, wrote in a Tuesday note.
“While net increase in corporate bonds financing remained roughly the same as September, continued contraction in trust loans, entrusted loans and banker's acceptance bills, muted local government special bond new issuance, as well as moderated growth in RMB loans, contributed to the weak credit data in October,” Song added.
Standard Chartered’s Renminbi Globalisation Index (RGI), the bank’s tracker for renminbi internationalisation, rose to 1,977 in September, a year-to-date high, according to a Wednesday note.
Strong cross-border payments, growing usage of renminbi in trade settlement for services and rising foreign holdings of onshore equities and bonds drove the increase.
“Net portfolio flows into China accelerated over the course of Q3, driving up foreign holdings of onshore equities and bonds 7.4% quarter-on-quarter and 8.4%, respectively,” according to the report. “Collectively, foreign holdings of offshore assets reached almost $6tr in September, up from Rmb4.8tr at end-2018, making it the most reliable positive contributor to the RGI year-to-date.”
Chinese onshore investors made a total of Rmb621.8bn in non-financial investments to 164 countries and 5,365 offshore corporations by October this year, Gao Feng, a spokesperson at the Chinese Ministry of Commerce, said in a Thursday press conference. That marks a 5.9% year-on-year growth.
Investments to Belt and Road countries took up 12.7% of the total investments.