A number of headwinds have piled up for China lately, which will likely postpone the recovery into the second half and require more easing measures. A recovery in H2 should give upside for Chinese stocks. Economists at Danske Bank also look for USD/CNY to turn higher as the Chinese trade surplus is set to come down.
“The Chinese economy has been hit by three new headwinds from covid outbreaks, the Ukraine war and financial stress. We expect this to delay a recovery into H2. We expect more economic stimulus, as China needs to step harder on the gas to lift the economy out of the current slump. The China weakness will add a further drag on the global economy in coming months, not least on Europe.”
“In recent weeks, Chinese stocks have recovered some of the lost ground and our call is still for Chinese offshore stocks to end the year higher than they started (but admittedly, the uncertainty is higher than normal).”
“Following a year of CNY appreciation despite all the challenges hitting China, we believe USD/CNY will move moderately higher over the next 12 months.”
“We already see signs exports will slow this year and later in the year, imports should start to recover on the back of stronger domestic demand.”
“We look for a rise in USD/CNY to 6.50 in 12M from the current level around 6.36.”
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