There are so many moving parts when looking at the China situation, especially over the past two weeks. You can’t argue with the numbers; some of the equities have risen between 25% and 43% in a month, which is extraordinary, and that could be sustained potentially into November. However, people are closely watching the demand picture. Naturally, they want to re-engage China but this needs to be seen not only in terms of funds flowing into the country, but also in terms of domestic engagement - from the property sector to manufacturing. The internal consumption engine really needs to kick in. Moving forward, we may see a gradual drip feed of larger stimulus measures, likely aimed at reengaging the property sector and manufacturing to get the infrastructure base back on track. There are significant challenges, particularly in the property sector, which has a large overhang of unsold properties and considerable debt that needs to be managed, both externally and internally. They’re trying to navigate all this without causing a crash. But for now, they’ve
certainly restored some confidence from a sentiment perspective.
What knock-on effects could we see on other commodities and geographies in Asia?
Copper is currently sitting at $9, 929 per metric ton on the LME, advancing strongly from the $9, 000 mark. Other metals, like nickel, lead, zinc, and aluminum, have also rallied strongly. It’s been a robust recovery. The key factor now is consumption. For sustained growth, there needs to be a market for finished goods, whether through internal consumption in China or external demand across Asia and into the West. This requires consumers who aren’t over-leveraged, strong earnings for manufacturers, and an appetite for finished products. Looking at the US consumer, demand there is relatively resilient, but inflation is still a concern, which will impact expenditure.