Waiting for the big one… China GDP

Anyone hoping for a quiet end to the trading week in Asia will be disappointed, as investors brace for a batch of top-tier economic data on Friday that includes Japanese inflation, Malaysian GDP, and the main event – Chinese GDP.

Other Chinese indicators – September’s retail sales, house prices, industrial production, unemployment, and investment – will also be released. But all eyes will be on third quarter growth and how close it is to the 5.0% mark.

That’s Beijing’s 2024 target, but most analysts say it will be missed. The wave of fiscal stimulus measures announced recently has come too late to boost growth this year but has prompted some economists to raise their 2025 forecasts.

Overall, however, analysts remain pretty glum. Their consensus forecast in a Reuters poll is that gross domestic product expanded 4.5% in the third quarter from a year earlier, slowing from 4.7% in the previous quarter.

For 2024 as a whole they forecast growth of 4.8%, undershooting the government’s target, and expect a further deceleration next year to 4.5%.

Citi’s Chinese economic surprises index has been inching higher in recent weeks but remains firmly in negative territory, where it has been since June. Investors are realizing that Beijing’s fiscal, monetary and liquidity support, however successful they prove to be, will take time to bear fruit.

This is perhaps reflected in Chinese stocks’ third decline in a row on Thursday – Shanghai’s blue chip index is down 15% from its October 8 peak, although still up around 18% since the first stimulus measures were unveiled last month.

Elsewhere in Asia on Friday Japan releases September inflation figures, with economists expecting a marked slowdown in the annual core rate to 2.3% from 2.8% in August. That would be the biggest month-to-month decline since February last year.

It would also support the thinking of Bank of Japan officials who favor a more cautious approach to tightening monetary policy.

The BOJ will forgo raising interest rates again this year, according to a very slim majority of economists in a Reuters poll published this week, although nearly 90% still expect rates to rise by end-March.

Japanese interest rate swaps traders are pricing in a 15 basis points rate hike from the BOJ in January, and only 35 bps of tightening in total next year.

The global market picture looks fairly positive though. On Thursday chip-making giant TSMC delivered an upbeat outlook and US economic data was strong, lifting the Dow to a new high.

Treasury yields and the dollar also rose on Thursday, which is not so positive for emerging markets, however. The dollar is its strongest in two and a half months and has appreciated in all but two of the last 14 trading days.

Here are key developments that could provide more direction to markets on Friday:

– China GDP (Q3)

– Japan inflation (September)

– Malaysia GDP (Q3)

(Reporting by Jamie McGeever)