As we have been quick to point out with China macro in the last six months or so, we do not place too large a weight on data that only reaffirms the obvious: China is not going to save the day again with a bounce in industrial activity and growth. China will be a rallying point based on less bad.
Last nights numbers were just that - non-spectacular but a relief that they were not worse. The data showed imports and exports both rising where negative survey consensus was expected. Chinese exports grew 0.9% y/y in April vs. -3.0% expected. Chinese imports were +0.8% vs. -2.1% estimates.
We would highlight two factors that should put the whole thing in perspective:
- the “over-invoicing” issue export decline look worse than it is
- the US consumer is come running back to the mall after digging out from his/her snowdrift. We shouldn’t be surprised to see some recovery here.
Valuation has come down to match slower growth projections. Quite frankly, the growth could not keep up at 50-70% levels it was running at. At today’s price, the stock trades at 19X estimated 2014 profits and 15.6X 2015. These are levels that can justify putting on a position even with growth closer to 25% over the next 12months. We are watching and waiting for the government crackdown fears to clarify, with a view they are overdone.