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The reflation trade is fading fast . China’s PPI is starting to roll over, and CPI is weaker than expected. Chinese import volume, excluding the effects of a weakened RMB and surging commodity price, has failed to impress. Surging sales of excavators and heavy trucks are due to nothing much more than seasonality in the first quarter of every year. Property sales growth in 3rd and 4th-tier cities is plunging into negative due to increasingly extended policy curbs on property speculation in many Chinese cities. Passenger car sales growth has also turned negative. Within a month, iron ore has plunged more than 20% into the bear market territory, after suffering the biggest single-day drop for more than a year. These are definite signs that the reflation trade is fading ( Focus Chart 1 ). Focus Chart 1: China’s PPI, a signpost for the reflation trade, i
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