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China Trade Data

01/10/2013

Overnight markets have a strong bid, potentially positioning the S&P 500® Index (SPX) to challenge the current high for the year from January 4 at 1467.94. The catalyst is the China trade data report which shows some encouraging points.  

 

  • Exports (Figure 1.1) rose 14.1% year on year, well ahead of last month’s 2.9% rise and estimates for a 5.0% rise this month.
  • Imports rose 6.0% year on year, after reporting flat last month. Expectations for this month were +3.5%.
  • The Trade Balance Surplus rose to $31.62 billion from $19.63 billion last month, again ahead of the $20 billion estimate for this month.
  • The 2012 China Trade Surplus reaches $231.1 billion, the highest yearly total since 2008, supporting continued favorable yuan appreciation (Figure 1.2).
  • Total Lending rose to $1.63 trillion from $1.27 trillion, an increase of $262 billion from last month to support domestic growth.

 

Investors should be encouraged with the modest external demand found in the exports by country data:

 

  • Exports to the U.S rose 10.3%, the highest level since June 2012’s +10.6%.
  • Exports to the European Union rose for the first time since May 2012, +2.3%.

o   November 2012 -18.0%, October 2012 -8.1%, September 2012 -10.7%, August 2012 -12.7%, July 2012 -16.2%, June 2012 -1.1%.

o   Exports to the United Kingdom surged 18.2% last month.

  • Exports to South Africa rose 69.7% from -0.7% last month.
  • Exports to Brazil rose 32.7% from 0.7% last month.

 

The strategy to align with a modest rebound in Chinese economic activity is further appreciation for the China yuan and Australian dollar (Figure 1.3), U.S materials sector recovery, and now a much faster than anticipated recovery in the U.S. industrials sector.

 

2013 Year-to-Date U.S. Sector Performance

 

SPX +2.44%

 

1.      Health Care +4.04%

2.      Materials +3.62%

3.      Financials +3.33%

4.      Industrials +3.01%

5.      Consumer Discretionary +2.34%

6.      Energy +2.02%

7.      Technology +1.91%

8.      Consumer Staples +1.86%

9.      Utilities +0.83%

 

Figure 1.1 China Export Data, December 2010 to December 2012

 

Source: Bloomberg

 

Figure 1.2 China Yuan 2012-2013

 

Source: Bloomberg

 

Figure 1.3 Australian Dollar 2012-2013

 

Source: Bloomberg

 

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.