Iron ore and steel rally as China’s economic growth exceeds expectations

Chinese stocks rallied after China posted better-than-expected growth in the first quarter, but equity funds were unable to capture early gains.

China’s gross domestic product grew 4.5 percent year-on-year in the first quarter, beating analysts’ expectations of 4 percent as the world’s second-largest economy began to recover from zero-covid-19 pandemic policies.

Chinese commodity markets responded positively to a 4.1 percent rise in property sales prices. Iron ore trading in northeast China’s Dalian city jumped as much as 3.5 percent to Rmb794.5 ($116) per metric ton, while iron ore recovery contracts traded in Shanghai jumped as much as 1.9 percent. to Rmb3,981 per metric ton.

Lisheng Wang, China economist at Goldman Sachs, said the higher growth rate indicated “a very strong recovery after the reopening”.

We expect activity data to improve further. [in the coming months] “It was at a very low level last year when Shanghai lifted strict lockdowns, in addition to opening initiatives and still accommodative macro policies,” Wang added.

The January-March growth rate was still below the government’s full-year target of 5 percent.

In stock markets, China-focused stocks were bought by the headline growth figures but later pared back much of their gains as investors pared mixed signals from March on retail sales and industrial production.

Shanghai and Shenzhen-listed shares pared earlier losses to 0.5 percent, while the CSI 300 index added just 0.1 percent. In Hong Kong, the Hang Seng China Enterprises Index of large mainland corporations fell 1 percent.

Analysts said first-quarter growth reflected a stronger economy and unexpected stimulus from the Chinese government.

Iris Pang, chief economist for Greater China at ING, said that “there is no need for immediate monetary stimulus to support consumers” as consumption rose more than 10 percent in March.

Elsewhere in the region, Japan’s benchmark Topix added 0.7 percent while Australia’s S&P/ASX 200 slipped 0.5 percent. Futures sent the S&P 500 down 0.1 percent in early trading on Wall Street, while the FTSE 100 was set to rise 0.2 percent.


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