FUNCTIONS FOR THE MARKET

FUNCTIONS
FOR THE MARKET
Anticipating Slower Growth in China
The Chinese economy is slowing to a forecast rate of 7.5 percent for 2013 as the government seeks to curb
excessive lending and reduce reliance on exports. Bloomberg functions help track GDP forecasts and identify
sectors that stand to gain from Chinese economic reforms. Use Bloomberg tools to monitor central bank
actions and assess the impact on interest rates, banking, equities markets and offshore flows.
TARGETING 7.5 PERCENT GROWTH
China will tolerate slower growth as it transforms its
investment-led economy into one driven by services
and consumption, Premier Li Keqiang said in March.
Economists have cut their forecasts for 2013 to an
expansion of 7.5 percent from 8.1 percent at the start of
the year, according to the median in a Bloomberg survey.
That’s in line with the government’s GDP target {ECFC
CN<GO>}. Retailers, automakers and tourism centers
such as Macau may be among potential winners if China
is successful at spurring consumer spending {BI CHINA
NSN MS802L6KLVR4 <GO>}. Analysts predict more
economic reforms will be announced at the Communist
Party’s Central Committee meeting in November.
gained 1.8 percent this year, the best performance of 24
emerging-market currencies {WCRS<GO>}. Meanwhile,
the government has expanded access to domestic
markets by loosening restrictions on offshore yuan
trading in Hong Kong and expanding access for foreign
institutional investors. The offshore yuan has traded at
a premium to the onshore currency for most of the year,
indicating investors expect further appreciation.
The Yuan Has Strengthened Against the Dollar in 2013
Consensus GDP Forecast Has Fallen Toward Official Target
REBOUND IN CHINESE EQUITIES
Chinese stocks also bounced back in August faster than
most emerging-market equities. The Shanghai Shenzhen
CSI 300 Index has gained more than 8 percent since June
26, though still some 60 percent below its October 2007
peak {SHSZ300 Index TRA<GO>}. The CSI 300 Index
is valued at about 11.4 times earnings, down from 47.4 in
September 2007.
TRACKING THE YUAN
Leaders helped restore confidence in Chinese assets in
July by promising to keep growth from slipping below 7
percent. They have also overseen a managed appreciation
of the yuan versus the dollar. The Chinese currency has
MONITORING LIQUIDITY AS PBOC SHIFTS POLICY
Policy makers are also addressing financial-sector risk,
even as growth slowed and fears rose about the end
of U.S. quantitative easing. Interest rates spiked as the
People’s Bank of China refrained from relieving an endof-quarter cash shortage and called on lenders to rein
in credit risk. The seven-day fixing repurchase rate has
since fallen to below 4 percent, after reaching a record
10.77 percent on June 20 {CNRR007 Index GP<GO>}.
The one-year interest-rate swap remains above historical
levels, which may indicate markets anticipate tighter
liquidity conditions. The PBOC has increasingly used
open-market operations to manage the supply of cash,
instead of adjusting reserve requirements and policy rates
{BI BANKA ASMOC |1213-2-W-DATA|W12 <GO>}. It
eliminated the floor on lending rates in July, which may
signal more liberalization.
ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 01
FUNCTIONS
FOR THE MARKET
Balancing Investment Risk
by Tracking China’s Data
The Bloomberg Industries China
dashboard houses datasets to help
monitor macroeconomic trends.
Run {BI CHINA<GO>} and click
‘Consumerization’ in the left-hand
menu for analyses of key consumer
industries. China’s auto sales are
on pace to reach a record in 2013.
Spending growth by Chinese visitors
to Macau accelerated to 14 percent
in the second quarter and retail
spending has also surged 12.3
percent in July from a year earlier.
Click ‘Demographics’ for details on
the urban migration helping to fuel
spending. Urban consumption has
risen an annualized 14 percent since
2000, compared with 8 percent in
rural areas.
— Jonathan Tyce
[email protected],
and Tim Craighead
[email protected]
Tracking Chinese Liquidity
Conditions, Policy, Impact
Bloomberg Industry’s Asia Bank
dashboard helps track open-market
operations by the People’s Bank of
China as it seeks to prevent credit
bubbles. Run {BI BANKA<GO>}
and select ‘PBOC Watch/China’ from
the left-hand menu within the ‘Data
Library.’ Click the ‘52) Key Dataset’
and ‘71) Policy Tools’ tabs to monitor
reverse repurchase agreements by
week. Use the ‘72) Rates (Current)’
tab to see the impact of central bank
actions on lending rates.
The seven-day fixing rate has fallen
to below 3.5 percent, close to levels
seen a year ago, after spiking 10.77
percent in June.
Keep track of lending activities using
the ‘53) China’ and ‘71) Banking
System’ tabs.
— Jonathan Tyce
[email protected]
ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 02
FUNCTIONS
FOR THE MARKET
Optimizing Chinese Stock
Portfolios WITh PORT
Bloomberg’s new China A Factor
Model within the Portfolio & Risk
tool helps construct a Chinese
equities portfolio that would
have outperformed the Shanghai
Shenzhen CSI 300 Index by 18
percentage points since the end of
2010, with lower total risk.
Run {PORT<GO>} to begin
optimizing a Chinese equities
portfolio. Enter the benchmark ticker
in both the ‘Port’ and ‘vs’ boxes, and
then click ‘14) Trade Simulation’ to
launch the optimizer.
For details on the optimization
and backtesting, see {NSN
MSMG7R6JTSEU <GO>}.
— Andrew Eliot [email protected],
Dorothy Chan [email protected],
Kahfai Kok [email protected]
and Erik But [email protected]
Monitoring the Slowdown in
Dim Sum Bond Issuance
Issuance of Dim Sum bonds has
slowed since June, as companies
outside of China found it less
profitable to raise debt in offshore
yuan to meet funding needs in local
currencies.
To track bonds issued in the offshore
Chinese currency, run {SRCH<GO>}.
Click ‘30) Example Searches,’ select
‘Dim Sum Bonds (Ex CD’s) and hit ‘1)
Load Search.’ Add Western Europe
and North America as the countries
of incorporation, then hit ‘1) Results.’
Click the ‘Matrix’ tab and compare
the total amount issued by month.
Issuance picked up slightly in August,
as the yuan resumed strengthening
and China’s economy showed signs
of stabilization. Bond activity remains
subdued compared with 2012.
Companies issued $495 million in
Dim Sum bonds in July of last year.
— Dorothy Chan
[email protected]
ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 03
FUNCTIONS
FOR THE MARKET
Using SDRV to Gauge USDCNY
Trade Recommendations
The Chinese yuan recently hit a 19year high against the U.S. dollar.
To see how the options market
is positioned run {SDRV <GO>}
for Bloomberg’s SDR Derivatives
Volumes tool. Click on the gray “FX”
tab, then the “Options” tab and click
View Strike/Maturity. Enter USDCNY
in the yellow box next to “single
security” and enter the date range
of 12-Aug-2013 through 15-Aug-2013.
The blue dots (calls) outnumber
the green dots (puts) indicating a
potential bullish bias on USDCNY.
— Alex Wenham
[email protected]
Identifying Companies WITH
EXPOSURE TO ChinESE GROWTH
Bloomberg tools help identify
companies based outside of China
with sales exposure there.
Run {EQS /SAMPLE 10620963 /
RESULTS <GO>} to screen for the
world’s largest 2000 companies’
exposure to China based on the
latest yearly results.
The results show that 14.4 percent of
Apple’s revenue comes from China.
Samsung also gets about 14 percent
of its revenue from China.
See the FFM article at {NSN
MSS7386JIJUO <GO>} for fulll stepby-step instructions about building
this screen.
— Constantin Cosereanu
[email protected]
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