China industrial production disappoints with only 5.6% y/y March growth

A brighter April generally is being sought.

China’s March activity data is confirmed and was noted as being disappointing, with the biggest downside surprise in industrial production, which rose a mere 5.6% YoY in March (Jan-Feb: 6.8%).

According to a research note from CCB International, however, this is consistent with the sharp drop in March exports.

China’s 1Q GDP growth came in line with market consensus and the government’s target, at 7.0%.

However, CCB International found the sharp slowdown in nominal growth more worrisome, given its better representation of corporate revenue and profits. Nominal GDP slowed by 1.9pt, to 5.8% YoY in 1Q15, marking the slowest growth since 1Q09 (5.7%).

CCB International expect an early recovery in April activity data and note some optimistic signs, including rebounding demand for commodity imports and mild improvement in funding for fixed asset investment.

Continued pickup in infrastructure investment is also being sought.

Here's more from CCB International:

We maintain our forecast of a 25bp rate cut in 2Q15F (likely in May) and three RRR cuts of 50bp in each remaining quarter. We also expect the PBoC to more actively inject liquidity into the economy through targeted easing.

During the week ended on 17 April, there have been net inflows of RMB8.5b (HK$10.6b) to the Hong Kong stock market and RMB6.6b (HK$8.3b) to the Shanghai stock market through the stock connect.

The Hang Seng Index (HSI) closed at 27,653 on 17 April, up 1.4% from a week ago, fuelled by capital inflows from global equity funds and southbound of the stock connect. The first public fund designed to invest in Hang Seng ETF was launched on 15 April. The initial investment through southbound is estimated to be HK$6.1b.

The Shanghai Composite Index touched intraday high of 4,317 on 17 April and closed 6.1% above the previous week. The daily increase in margin purchase for the Shanghai Stock Market slowed, as most brokerage houses are exhausting their lending capacity, and on 17 April the China Securities Regulatory Commission urged brokerages to be prudent in margin financing for stock markets.

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