EUR 155.78 For Business Accounts Only

022618 CGI Weekly Global Equities Strategy Update

In Asia, Chinese economic growth will moderate, mostly due to slightly weaker domestic demand as authorities continue enforcing financial deleveraging via tighter financial regulations, although the deceleration will be only gradual and managed by the government. Latest consensus forecast is that China’s economy will grow 6.5% in 2018, which is unchanged from last month’s forecast, and by 6,3% in 2019. Economic indicators suggest the economy continued to fire on all cylinders at the outset of the year. Domestic demand remains resilient as shown by strong import growth in January, while healthy global demand is propelling exports and activity in the manufacturing sector. Data for the first 2 months of the year is highly distorted by the Lunar New Year holidays. Because of China’s healthy growth momentum and rising confidence about the state of the economy, the Yuan has strengthened sharply in recent weeks. With the economy sailing smoothly, China will hold the annual National People's Congress in early March, in which the main policies and economic targets will be forged.

 Japanese January core consumer price index rose 0.2% compared to the previous month in seasonally-adjusted terms, following December’s 0.1% increase. Core inflation came in at 0.9% in January, matching the result in the previous two months, which represented the joint-highest reading since March 2015, and in line with market analysts’ expectations. Overall inflation increased from 1.0% in December to 1.4% in January, the highest reading in nearly 3 years. With oil prices moderating the pace of rise, a government official stated that inflation is, “expected to be flat in the coming months”.  We see subdued inflation pressures will force the BOJ keeping its ultra-loose monetary policy unchanged for the foreseeable future. The BoJ expects that core inflation will average between 1.3% to 1.6% in the fiscal year ending March 2019. In 2019/20, the BoJ sees core inflation rising to between 2.0% and 2.5%. Consensus forecast for inflation is of 0.9% in calendar year 2018, which is up 0.1% points from last month’s estimate. In 2019, the panel sees inflation at 1.3%.