China Exports Fall for a Fourth Month as Once-Reliable Growth Engine Sputters - Kanebridge News
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China Exports Fall for a Fourth Month as Once-Reliable Growth Engine Sputters

Property sector’s downturn has pushed imports to their 11th month of declines in the past year

By STELLA YIFAN XIE
Fri, Sep 8, 2023 9:18amGrey Clock 4 min

HONG KONG—China’s exports to the rest of the world dropped for a fourth straight month in August, bringing little relief to the country from a deepening economic malaise and weighing on the global trade outlook.

China has struggled to sustain a wave of overseas demand for Chinese-made goods that carried it through much of the three years of the pandemic, particularly as Western consumers tilted their spending back toward services and away from smartphones, furniture and other goods. Higher borrowing rates in the U.S. and other developed countries also hit consumer appetite.

Meanwhile, Chinese imports continued to shrink in August, a reflection of lacklustre consumer demand even after the country loosened its longstanding Covid-related restrictions. A downturn in China’s property market has also sapped demand for raw materials used in construction.

Taken together, the sluggish trade data released Thursday by Beijing provides new evidence that the world’s second-largest economy is struggling to revive domestic demand.

That would ripple through the global economy as China’s slowdown weighs on oil prices and hurts commodity-exporting countries such as Australia, Brazil and Canada. Chinese manufacturers have been under pressure to cut prices to retain market share, potentially sending disinflationary currents around the world.

While Chinese policy makers have trimmed key interest rates and made new attempts to revive home-buying sentiment, economists have widely dismissed these efforts as too piecemeal to revive growth given the speed with which sentiment has soured.

“There’s still a steep hill to climb to get the all-clear on stabilisation for China,” said Frederic Neumann, chief Asia economist at HSBC.

China’s outbound shipments declined 8.8% in August from a year earlier, China’s General Administration of Customs said Thursday. The reading narrowed from the 14.5% year-over-year drop in exports in July, which marked the worst such result since February 2020.

Imports to China, including intermediate components, commodities and consumer products, fell 7.3% in August from a year earlier, slower than July’s 12.4% drop.

Even with the better-than-feared trade data, economists generally agree that exports’ ability to provide support for China’s sputtering recovery remains a distant prospect, particularly given that global trade is expected to contract this year.

“We expect exports to decline over the coming months before bottoming out toward the end of the year,” research firm Capital Economics told clients in a note Thursday.

Apart from the general slowdown in trade, China is facing a raft of other economic headwinds. After a brief spurt of spending in traveling and dining out upon reopening early this year, consumers tightened their purse strings, dragging consumer prices into deflationary territory in July. China is set to report August inflation data on Saturday.

Factory activity, meantime, reported a fifth straight month of contraction in August, while a years long downturn in the housing market has only deepened in recent months. Private investment remains depressed, while the youth jobless rate climbed to a series of record highs in the summer before Beijing decided to discontinue releasing the data to the public.

More broadly, the run of downbeat data during the summer months has sparked growing concerns over China’s long-term growth trajectory and prompted several investment banks to trim their growth forecasts for gross domestic product to below 5% for the year, compared with the official government target of around 5%, which was set in March.

Meeting with Southeast Asian leaders this week, Chinese Premier Li Qiang struck back against widespread pessimism about the country’s near-term economic outlook, saying the country is on track to hit its growth target for the year.

While Chinese policy makers have rolled out a batch of stimulus measures in recent weeks, including trimming interest rates for businesses and home buyers and extending tax relief to households, many economists have questioned whether the policies will be enough to turn around weak consumer sentiment.

China’s reduced appetite for imports—which have fallen for 11 of the past 12 months—reflects in large part the knock-on effects of the country’s continuing property crisis. Both property investment and new construction starts have plunged in recent months amid a loss of confidence in home prices; that in turn has curbed China’s appetite for commodities such as iron ore.

The export data, meanwhile, offers more evidence of China’s shifting trade patterns.

As ties have soured between Beijing and Washington, many U.S. companies have begun to redirect supply chains away from China and toward other Asian countries such as India, leading to a sharp decline in America’s reliance on goods from China.

Rising operational uncertainty, made most clear during China’s pandemic-era lockdowns, which disrupted domestic and global production and logistics, heightened the urgency for many multinationals.

In the first half of the year, China accounted for 13.3% of U.S. goods imports, down from a high of 21.6% in 2017 and representing the lowest level since 2003.

Meanwhile, trade with the 10-member Association of Southeast Asian Nations has grown over the past year to become China’s largest export market, ahead of the U.S. and European Union, according to a recent report by HSBC.

China’s warmer trade relations with Asian countries will help buffer the impact of softening Chinese exports to advanced economies. But economists say Beijing won’t be immune if the U.S. and other advanced economies tip into recession.

Global goods trade is expected to drop by 1.5% this year in part due to tightening global monetary and credit conditions before staging a modest recovery of 2.3% growth in 2024, according to estimates by Adam Slater, lead economist at Oxford Economics.

China’s weakening trade activities, meanwhile, is likely to ripple across Asia, slowing industrial expansion and hitting commodity prices, he added.

—Xiao Xiao in Beijing contributed to this article.



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These stocks are getting hit for a reason. Instead, focus on stocks that show ‘relative strength.’ Here’s how.

By KEN SHREVE
Wed, Jun 12, 2024 4 min

A lot of investors get stock-picking wrong before they even get started: Instead of targeting the top-performing stocks in the market, they focus on the laggards—widely known companies that look as if they are on sale after a period of stock-price weakness.

But these weak performers usually are going down for good reasons, such as for deteriorating sales and earnings, market-share losses or mutual-fund managers who are unwinding positions.

Decades of Investor’s Business Daily research shows these aren’t the stocks that tend to become stock-market leaders. The stocks that reward investors with handsome gains for months or years are more often  already  the strongest price performers, usually because of outstanding earnings and sales growth and increasing fund ownership.

Of course, many investors already chase performance and pour money into winning stocks. So how can a discerning investor find the winning stocks that have more room to run?

Enter “relative strength”—the notion that strength begets more strength. Relative strength measures stocks’ recent performance relative to the overall market. Investing in stocks with high relative strength means going with the winners, rather than picking stocks in hopes of a rebound. Why bet on a last-place team when you can wager on the leader?

One of the easiest ways to identify the strongest price performers is with IBD’s Relative Strength Rating. Ranked on a scale of 1-99, a stock with an RS rating of 99 has outperformed 99% of all stocks based on 12-month price performance.

How to use the metric

To capitalise on relative strength, an investor’s search should be focused on stocks with RS ratings of at least 80.

But beware: While the goal is to buy stocks that are performing better than the overall market, stocks with the highest RS ratings aren’t  always  the best to buy. No doubt, some stocks extend rallies for years. But others will be too far into their price run-up and ready to start a longer-term price decline.

Thus, there is a limit to chasing performance. To avoid this pitfall, investors should focus on stocks that have strong relative strength but have seen a moderate price decline and are just coming out of weeks or months of trading within a limited range. This range will vary by stock, but IBD research shows that most good trading patterns can show declines of up to one-third.

Here, a relative strength line on a chart may be helpful for confirming an RS rating’s buy signal. Offered on some stock-charting tools, including IBD’s, the line is a way to visualise relative strength by comparing a stock’s price performance relative to the movement of the S&P 500 or other benchmark.

When the line is sloping upward, it means the stock is outperforming the benchmark. When it is sloping downward, the stock is lagging behind the benchmark. One reason the RS line is helpful is that the line can rise even when a stock price is falling, meaning its value is falling at a slower pace than the benchmark.

A case study

The value of relative strength could be seen in Google parent Alphabet in January 2020, when its RS rating was 89 before it started a 10-month run when the stock rose 64%. Meta Platforms ’ RS rating was 96 before the Facebook parent hit new highs in March 2023 and ran up 65% in four months. Abercrombie & Fitch , one of 2023’s best-performing stocks, had a 94 rating before it soared 342% in nine months starting in June 2023.

Those stocks weren’t flukes. In a study of the biggest stock-market winners from the early 1950s through 2008, the average RS rating of the best performers before they began their major price runs was 87.

To see relative strength in action, consider Nvidia . The chip stock was an established leader, having shot up 365% from its October 2022 low to its high of $504.48 in late August 2023.

But then it spent the next four months rangebound—giving up some ground, then gaining some back. Through this period, shares held between $392.30 and the August peak, declining no more than 22% from top to bottom.

On Jan. 8, Nvidia broke out of its trading range to new highs. The previous session, Nvidia’s RS rating was 97. And that week, the stock’s relative strength line hit new highs. The catalyst: Investors cheered the company’s update on its latest advancements in artificial intelligence.

Nvidia then rose 16% on Feb. 22 after the company said earnings for the January-ended quarter soared 486% year over year to $5.16 a share. Revenue more than tripled to $22.1 billion. It also significantly raised its earnings and revenue guidance for the quarter that was to end in April. In all, Nvidia climbed 89% from Jan. 5 to its March 7 close.

And the stock has continued to run up, surging past $1,000 a share in late May after the company exceeded that guidance for the April-ended quarter and delivered record revenue of $26 billion and record net profit of $14.88 billion.

Ken Shreve  is a senior markets writer at Investor’s Business Daily. Follow him on X  @IBD_KShreve  for more stock-market analysis and insights, or contact him at  ken.shreve@investors.com .