Stock markets in China shook off the initial disappointment from the latest trade figures released on Tuesday and ended up on the day.
Investors took comfort in the fact that Chinese trade growth is continuing to improve sequentially, albeit narrowly missing economist estimates, and ultimately pushed the benchmark Shanghai Composite index to its highest level since January. Hong Kong also finished 0.5% higher.
The China Customs data showed that October exports fell 7.3% in dollar terms compared to last year, while imports dropped 1.4%. Both beat September exports which fell 10% while imports contracted nearly 2%.
China’s monthly trade surplus ballooned to US$49.06 billion, up from US$41.99 billion for September.
Consensus estimates were looking for exports to contract 5.9%, and imports drop 1%, with a trade surplus of US$51.7 billion.
The surprisingly large 0.8-point jump in the October Manufacturing PMI published on November 1 was likely to have led economists into thinking the recovery would be reflected in a substantial pick up in foreign trade.
But as the PMI report had adequately warned, new export orders turned negative in October, indicating the renewed challenges facing Chinese exporters. The latest trade report confirms that imports, a proxy for domestic demand, remain the stronger of the two.
Coal imports stay elevated
Coal imports registered 21.58 million tons in October, down from 24.44 million in September. Nevertheless, the import tonnage for the first 10 months rose 18.5% from a year ago, and is likely to stay high in the near future. Domestic output cuts and cheaper import prices are driving China’s thirst for coal.
Meanwhile, steel product exports lost steam for the fourth straight month, decreasing to 7.7 million tons in October from 8.8 million tons in September.
Exports of the basic industrial material are reversing course after surging earlier in 2016, with year-to-date growth coming in at just 0.7%. An increase in trade conflicts and more countries joining boycotts of Chinese steel has led to the decline.
The European Union has been China’s top trading partner for the first 10 months, with a 15% share, up 2.3% in value terms, while the United States ranked in second place at 14.1%, but with bilateral trade contracting 3.2% in value. The ASEAN region does the third most business with China at 12.2%, up a marginal 0.1% in value.