Fundamental Analysis (Part 4) - Asian Figures

Overview
Fundamental analysis considers how global economic news and other events impact financial markets. For example, on a country level, if monetary policies were amended for the benefit of the country’s economy, then it indicates that its currency should gain strength, thus encouraging investors to trade it. Read our fourth educational article in this series, which tackles the most important Asian figures affecting fundamentals analysis.
outcome

Key Asian figures influencing fundamental analysis.

Reading time
8 minutes
experience level
  • beginner Beginner

Asian Figures


China Trade Balance


This figure indicates the difference between the imported and exported goods and services over the reported period. If more goods and services were exported, the number will be positive, and the opposite is correct. A number higher than expected is taken as a positive sign for the Chinese Yuan (CNY), while the opposite is a negative sign.


This figure is crucial for China’s economy as it is the world’s largest exporter of goods and one of the economic pillars.

The Chinese government even continuously attempts to devalue its currency to make its manufactured goods more attractive.

 

China has almost always relied on a trade surplus as it displays demand on their highly competitive and cheap manufactured goods. A rising surplus indicates increased demand for Chinese goods, thus boosting the Yuan and vice versa.

 

China Exports (Year-on-Year) 


This term refers to the number of exported goods and services from residents of the country to non-residents. A number higher than forecast is usually taken as a positive sign for the Yuan, while the opposite is taken as a negative sign for the currency.

 

China Imports (Year-on-Year)


Chinese Imports measure all goods and services brought into the country from another country in a legitimate fashion, typically for the use in trade. Foreign producers provide imported goods and services to domestic consumers. A number lower than expected is usually taken as a positive sign, and the opposite is true.

 

China’s Official Manufacturing Purchasing Managers Index (PMI)

 

This index, commonly referred to as PMI for short, is designed to give a sign about the economic activities in the Chinese manufacturing sector. The data is collected and displayed by the National Bureau of Statistics (NBS) and presented by the China Logistics Information Centre (CLIC) and the China Federation of Logistics and Purchasing (CFLP).


The Purchasing Managers Index is an indicator of economic health or conditions of the manufacturing sector. It is comprised of five major indicators, which include employment conditions and environment, deliveries of suppliers, production, inventory levels, and new orders.


This data compiles the responses of 700 manufacturing enterprises all over China on a monthly basis, considering their supply situation and purchasing activities.

This PMI is highly regarded by central bankers when used in decision-making. A number higher than expected is usually taken as a positive sign for the Yuan, while the opposite is taken as a negative sign.

 

China Non-Manufacturing (Services) Purchasing Managers Index (PMI)

 

This non-manufacturing PMI gives an early indication on the sector’s economic activities each month.


Similar to the manufacturing PMI, the data is collected and displayed by the National Bureau of Statistics (NBS) and presented by the China Logistics Information Centre (CLIC) and the China Federation of Logistics and Purchasing (CFLP).


It is also comprised of the responses of 700 non-manufacturing enterprises all over China on a monthly basis, considering their supply situation and purchasing activities.

 

China Caixin Manufacturing Purchasing Managers Index (PMI)

 

This Chinese manufacturing PMI delivers a holistic view of the sector’s activity, acting as a leading indicator for the whole economy. When the PMI reading is higher than 50.0, this means that the manufacturing economy is expanding, while the opposite means that the economy is declining.


Flash figures are released approximately six business days before the end of the month, prior to releasing a final reading revising the data for the same month.

 

In contrast with the official PMI releases, the Caixin PMI is concentrated on smaller private firms and is concluded from a monthly survey of about 430 purchasing managers. These surveys revolve around rating business conditions, including inventories, new orders, supplier deliveries, production, prices, and employment.

 

China Caixin Services Purchasing Managers Index (PMI)

 

This index is designed to track multiple variables in the services sector, such as prices, inventories, and employment. It surveys over 400 private service sector companies’ purchasing executives, who are carefully chosen to accurately replicate the true structure of the services economy.

 

China Industrial Production (Year-on-Year)

 

This indicator measures the change in the value of manufacturers, miners, and utilities in the economy’s output, after being adjusted for inflation.


Factory output in China is the most important industry and the major pillar of its economy.


The monthly releases provide continuous insight into how the economy is handling

production, costs, and supplies.

 

The Bank of Japan (BoJ) Interest Rate Decision

 

The Bank of Japan holds eight meetings per year to decide on the Monetary Policy

and update its inflation and interest rate expectations.

 

Japan Household Spending (Month-on-Month)

 

This indicator gauges the change in the value of all expenses by consumers after inflation adjustments. A number higher than expected is usually taken as a positive sign for the Japanese Yen, while the opposite is taken negatively.

 

The monthly release shows a year-on-year and monthly change in household spending. The indicator’s impact reflects directly on the Japanese yen.

 

Bank of Japan’s Tankan Large Manufacturers Index

 

The Bank of Japan’s Tankan Large Manufacturers Index, officially known as the short-term economic observation survey, is a statistical survey conducted by the Bank of Japan based on the Statistical Law, and it aims to accurately show corporate trends throughout the country and to contribute to the appropriate management of Monetary Policy. The index is comprised of about 10,000 companies across the country quarterly.

 

This index affects stock prices and currency rates considerably and is taken as a key financial indicator. This index is considered a prominent measure of economic growth.

 

Japan National Core Consumer Price Index (CPI) (Year-on-Year)

 

The CPI measures the change in the price of goods and services purchased by consumers, excluding fresh food.

 

A stable price level with inflation of around 2% is desired in all economies, but in the case of the Japanese economy, that has not been the case for almost three decades. The deflation problem Japan has been facing means that inflation numbers are read differently than most other nations.

 

A decline in the price level has had a severe dampening impact on the Japanese economy, and the Bank of Japan has struggled to get level back into appropriate territories.

 

Therefore, the CPI release is one of the most closely watched indicators in the Japanese economy.

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