Compared to the first few trading days of the year, when the Shanghai Composite lost more than 5 percent per day, the three percent loss from May 9 is moderate.
Nonetheless, the Chinese S&P 500 is only 6 percent off its January low of 2655. And this is after the record stimulus from the first quarter which stabilized growth and stocks a bit.
Some may suspect recent trade data was responsible for the rout, as both imports and exports declined and missed expectations. Exports fell 1.8 percent in April compared to April of 2015 and imports crashed 10.9 percent.
However, Capital Economics thinks the data is ok compared to the first quarter and after smoothing out Chinese New Year distortions happens at a different date every year. “In reality, the latest figures are not that bad relative to China’s recent trade performance,” the analysts comment.
In reality, people have gotten used to bad trade data from China and often even ignore it. Another important data point which has unsettled markets in the past also came in favorably.
China’s foreign exchange reserves increased $7 billion to $3.22 trillion in April, the second month of gains after March. This means less capital outflows, probably around $25 billion, a lot less than the triple-digit outflows of January and February.
