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China’s economy on track

Asia continued its upward journey without any major problems in April. Carnegie Asia rose by 4.2 percent.

The market mood is one of general global optimism. The stock market is being driven, above all, by positive signals about the development of the US economy, with growth but without inflationary pressures, and good development for corporate profits. This climate provides the conditions for the Fed to lower interest rates in the autumn.

China’s economy is also heading in the right direction after its economic policy became more stimulating at the beginning of the year through various measures. GDP growth was 6.6 percent for the first quarter. China lowered bank reserve requirements at the start of the year in order to increase lending. Other measures having a positive impact are tax reductions for companies, a reduction in VAT on consumer goods and deductibility of mortgage loan interest.

Housing sales have already shown a rising trend. The reduction in VAT is to be funded by state-owned companies in areas such as banking, energy and telecommunications being expected to increase their dividends.

However, it is clear from the Chinese government that is does not wish to create any bubbles, either on the stock exchange or in the real estate market. China’s economic fine-tuning will continue.

Everyone in India is waiting for the election outcome, which resulted in a flat stock exchange this month.

The election in Indonesia is now settled, and incumbent President Joko Widodo has lost. His challenger, Prabowo Subianto of the Gerindra party, is claiming his mandate to rule. Prabowo has had a long career as a general in the Indonesian army and served during Suharto’s time in power and until 1998. Joko Widodo has been criticised for giving Chinese companies too many lucrative contracts for building infrastructure in the country. Prabowo appears more like a strong leader with a nationalist stance.

A resolution to the trade conflict between the US and China, and a weaker dollar, are other factors that could be positive for Asia.

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