Chinese Industrial Firms Return to Profit

After a lackluster Friday which saw stocks mixed in thin holiday trade, risk sentiment is expected to be boosted following some positive news emanating from Chinese industrial firms.

In a report issued by the National Bureau of Statistics (NBS) on Sunday, it was revealed that Chinese industrial firms’ profits returned to growth for the first two months of this year. This was despite business conditions weakening and economic growth slowing.
When combining all the profits earned by Chinese industrial firms for the first two months of 2016, there was a 4.8 percent increased from the year earlier, totaling 780.7 billion yuan. This was compared with a decline of 4.7 percent annually in December of last year, which was the seventh consecutive month of declines.
The unexpected uptick in China’s industrial firms’ profits was in part due to a narrowing in the fall of industrial producer prices and quicker product sales according to a statement released by the National Bureau of Statistics (NBS) along with the data.

Many sectors benefited from the lower oil prices, with prices of Crude Oil falling to 13-year lows. China is the world’s second largest consumer of oil. The Food industry also experienced strong growth. The growth was driven by a fall in prices for some raw materials and increased demand.

The positive news is expected to boost risk sentiment. This should see investors favor high yield assets such as stocks when markets reopen tonight.

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Daniel Simmons