Consistent with our recent work, the Chinese growth outlook for the remainder of the year appears rather dour indeed.
This is evidenced by this morning’s data, which showed manufacturing growth hitting an 11-month low in July. Asian markets were mostly lower on the news, with the Shanghai Composite falling 1.3%.
The consensus response (i.e. “Must… Stimulate… Now…”) remains largely offsides. Pulling forward railway construction won’t move the needle on Chinese growth. In reality, all it does is create a vacuum of reduced outlays to muddle through on the back-end.
Still, we don’t want to be short anything that even remotely resembles a stimulus package. The buy-side is trained to buy stimulus now, and ask questions later.
