Emerging market assets, including Indonesian stocks and the rupiah, are being supported today by the release of China's official third quarter gross domestic product (GDP) growth figure. The economy of China expanded 6.9 percent (y/y) in Q3-2015, slightly beating expectations (at 6.8 percent y/y) on relatively robust spending by Chinese consumers. Most emerging market assets strengthened after the news as a slightly better Chinese economy (implying higher Chinese demand) impacts positively on other countries in the Asian region on expectation of improving export performance.
Although beating expectations, the 6.9 percent GDP growth figure of China is still a six-year low for the world's second-largest economy and with persistent weak trade and manufacturing data as well as a weakening property sector, concerns about China's economy are not to wane soon.
The government of China has already cut interest rates five times since November 2014 in a bid to boost the country's sluggish economic growth, and analysts expect that more rate cuts are to be seen before the year-end (as well as another cut to banks' required reserve ratio). China's government also announced plans to boost spending on infrastructure projects. However, it remains to be seen whether the country can achieve its 7 percent (y/y) growth target in (full-year) 2015.
On a positive note, growth in China's retail sales climbed to 10.9 percent (y/y) in September 2015 (from 10.5 percent in the preceding month), while spending on e-commerce expanded by 36 percent (y/y) in Q3-2015.
A JPMorgan analyst noted that China's services sector is now growing much more rapidly (at 8.4 percent in Q3-2015 y/y) than the manufacturing sector (the industry sector, which includes manufacturing, grew 6 percent y/y in Q3-2015). In recent years, China has been eager to transform its economy from export & investment-driven to consumption-driven. This transformation is partly to blame for the country's economic slowdown.
Gross Domestic Product China (annual % change):
So far this month, the rupiah has been the strongest currency in Asia (against the greenback) on expectation that the Federal Reserve will postpone a Fed Fund Rate hike until 2016. In the September policy meeting, the Federal Reserve decided to maintain ultra-low interest rates partly because of concern about the hard landing of China's economy.
The Indonesian rupiah had appreciated 0.06 percent to IDR 13,532 per US dollar by 11:25 am local Jakarta time (Bloomberg Dollar Index) on Monday (19/10). However, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.21 percent to IDR 13,563 per US dollar.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Meanwhile, Indonesia's benchmark Jakarta Composite Index (IHSG) had risen 1.00 percent to 4,567.06 points by 11:00 am local Jakarta time on Monday (19/10).
Live Economic Calendar Powered by Investing.com