"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 9 June: China to report May trade balance
• 9 June: China to report May import and export year-on-year growth rates
• 10 June: China to report May Consumer Price Index (CPI)
• 10 June: China to report May Industrial Producer Price Index (PPI)
• 10 June: China to report May M0, M1, and M2 money supply growth rates
• 10 June: China to report May total social financing (TSF)
• 10 June: China to report May new renminbi loans

The second week of June will see a pickup in the pace of major data releases for China markets.

Regarding inflation, we expect May CPI to come in at 1.2 per cent year-on-year, unchanged from the previous reading, corresponding to a month-on-month decline of 0.2 per cent from April. For industrial prices, we expect May PPI inflation to rise to 3.7 per cent year-on-year from 2.8 per cent previously, corresponding to a 0.5 per cent month-on-month increase. Seasonal effects likely continued in May, with CPI easing modestly on a sequential basis while the annualized rate sustained a recovery.

On the industrial side, price signals somewhat softened: in May, the input price index fell by 3.2 percentage points and the ex-factory price index declined by the same margin, pointing to some easing in raw material cost pressures and a moderation in the overall level of manufacturing prices. However, both remain elevated particularly in textiles, chemical fibres, and rubber and plastic products, as well as ferrous metal smelting and rolling. Overall, we expect PPI to remain positive in May although gains have likely eased. At the same time, the still-wide gap between input and ex-factory prices remains worth monitoring closely. If sustained, it would continue to squeeze corporate margins, particularly for downstream producers.

Credit data are likely to remain the softer part of China’s macro picture in May. We expect new loans to total RMB 200 billion (USD 29.5 billion), around RMB 420 billion (USD 62 billion) lower than a year earlier, while total social financing is likely to add RMB 1.18 trillion (USD 174 billion), still 7.5 per cent or about RMB 1.11 trillion (USD 164 billion) lower from May 2025. The main drags are likely to come from credit, government bonds, and undiscounted bankers’ acceptances. The decline in rates also suggests that banks continue to face pressure in deploying assets while loan demand from the real economy remains relatively weak.

On money supply, we expect M2 growth to ease to 8.5 per cent year-on-year and M1 growth to slow to 4.9 per cent, suggesting that the transmission from broad liquidity support to credit expansion remains less than smooth, and the amount of money in circulation still has room to improve. That said, the current macro financing environment should not be assessed solely through the lens of new RMB loans. One must note that the role of direct financing, government bond issuances, and shifts in on- and off-balance-sheet financing structures is becoming increasingly important in shaping both TSF and overall funding conditions for the real sector.

Equity market performance was mixed over the past week. As of Thursday, 4 June, the MSCI China Index was up 1.25 per cent, while the Shanghai Composite declined by 0.27 per cent. The Shenzhen Component and ChiNext indices climbed 0.55 per cent and 1.26 per cent, respectively. Large-cap stocks continued to slightly outperform their small- and mid-cap peers, while value modestly outpaced growth.

Looking ahead, recent market volatility appears to reflect crowded positioning in technology shares and some degree of short-term overheating in market microstructure following the rapid rallies, as opposed to a clear deterioration in underlying industry fundamentals. More broadly, current economic growth continues to rely mainly on resilient exports and ongoing policy support while the contribution from domestic demand remains comparatively subdued. Against that backdrop, we remain constructive for the second half of 2026. The resonance between the restructuring of global order and China’s industrial innovation trend remains the core driver of this round of market gains and the re-rating of Chinese assets. These two conditions remain firmly in place. In our view, the market is now better positioned than in previous cycles for a more sustained and stable advance.

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.