Jakarta, CNBC Indonesia – China managed to record economic growth of 8.4% year on year (yoy) in 2021. The Chinese Bureau of Statistics reported that China’s Gross Domestic Product (GDP) grew 4% yoy in Q4-2021.
China’s economy grew higher than the consensus forecast in Q4-2021 which was estimated at only 3.6% yoy. China’s industrial production rose 4.3% yoy, higher than the market forecast of 3.6% yoy last December.
However retail sales grew only 1.7% yoy over the same time, lower than the consensus forecast of 3.7% yoy.
One of the factors that weigh on China’s economic growth actually comes from the side of government policies.
For now, the policies applied are zero Covid-19 case. This means that the Chinese government will not hesitate to pull the emergency brake if a Covid-19 case is found.
On the other hand, the slowdown occurred in the property sector, which accounts for a quarter of the total national GDP.
The case of default on bonds of Chinese property developers such as Evergrande has become one of the highlights of global financial markets.
As an export destination country and Indonesian investor. China’s economic slowdown will have an impact on Indonesia’s economic slowdown.
For financial markets, especially for risky assets such as stocks, the economic slowdown in China and Indonesia is not good news. Because when the economy slows down, production and sales also drop.
As a result, the financial performance of issuers on the stock exchange is also affected. Moreover, issuers that have large exposure to the Chinese market, such as coal and CPO commodities.
The economic slowdown in China and Indonesia will cause expectations for issuer’s earnings growth (earnings per share/EPS) to also decline. Of course, the slowdown in EPS will also affect the valuation or target of the Jakarta Composite Index (JCI).
But usually the financial market will move first than the release of economic data which tends to be lagging.
CNBC INDONESIA RESEARCH TEAM
(trp/trp)
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