China's (FXI, quote) trade data last night served as a relief for global markets after two straight months of dismal data showing significant contraction.

china_ballAs 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:

  1. the “over-invoicing” issue export decline look worse than it is
  2. 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.

Put Melco (MPEL, quote) on your watch list and build a 50% position around $30.50-$31.00


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