JSE faces slow start on Monday as China’s economy decelerates
With credit growing at a faster rate, the country’s debt-to-GDP ratio is likely to increase, analysts say
SA stocks could be in for a subdued start to the week, with Asian markets trading mixed following a data release that showed China’s economy grew at the slowest quarterly rate in nearly three decades.
The world’s second-largest economy grew 6.2% in the second quarter — in line with expectations — amid an ongoing trade war with the US.
The Chinese government will probably take action to prevent the economy’s growth rate from slipping below 6%, analysts at ANZ Banking Group said on Monday.
But with credit growing at a faster rate, the country’s debt-to-GDP ratio is likely to increase, the bank said.
“We remain concerned about whether the credit expansion can boost real economic activities. We believe the People’s Bank of China will continue to adopt a targeted policy as opposed to quantitative easing to support growth,” it said.
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The Shanghai Composite index was 0.8% up on Monday morning, while Hong Kong’s Hang Seng index added 0.2%.
But Korea’s Kospi and Singapore’s main benchmark both lost 0.1%, and Australia’s main stock index fell 0.4%.
WeChat-owner Tencent rose 0.9% in Hong Kong, suggesting a positive start for major shareholder and Africa’s biggest public company, Naspers.
JSE-heavyweight BHP Group was 0.7% higher in Australia.
No major company results are expected locally on Monday, while earnings season will kick off in the US later in the day. Disappointing company results from the world’s largest economy would likely halt the current equity rally, analysts say.
Meanwhile, the rand remained below the R14/$ mark on Monday morning thanks in part to expectations for a US interest rate cut. The Reserve Bank is expected to announce its interest rate decision on Thursday.
The rand was at R13.96/$, R17.54/£, and R15.73/€ in early trade.