Strategy Note /
China

CN : Strategy - May 22 CPI and PPI in line; may support a market rebound in the near term

    Mark Po
    Mark Po

    Research Analyst

    CGS-CIMB
    11 June 2022
    Published by

    The NBS released the May 22 CPI and PPI data today, which were generally in line with market expectations. We believe that the figures could support a market rebound in the near term. However, the gradual recovery after the easing of lockdowns may limit the transmission of high input costs from upstream to downstream players. The higher input costs may put pressure on the profitability of some downstream names. Upstream names are expected to benefit from the Chinese government’s stimulus measures (the May 2022 imports of industrial commodities confirm our view). But we can’t rule out any new measures or intervention on commodity prices by the authorities. We maintain the view that investment-related names will remain the focus of the market. We believe that consumption-related names may benefit from the recovery but that potential margin pressure may offer a negative surprise. Industrial commodities are expected to benefit from a pick-up in investment in China and overseas markets and the resumption of production in China. The analysis in this report is based on industry and macro figures and may differ from the views of individual analysts, in some cases.