Head of BofA Global Research
China meets this week to approve a new Five-Year Plan, and with global trade tensions high, there will be particular focus on domestic demand—we discuss the economic and market implications. BofA Global Research’s Alternative Data Primer offers an expansive view of data and sources and then we get specific, looking at our construction equipment dealer survey.
When the Communist Party meets this week to approve China’s 14th Five-Year Plan, China Economist Helen Qiao expects the government to target growth in excess of 5%, below 6.5% in the last plan, and emphasize dual circulation (global integration coupled with boosting domestic demand), innovation, and urbanization. Private consumption of goods represents less than 40% of China’s GDP as compared to 70% in the US, and the government is likely to encourage more spending on services and higher quality domestic products.
China has already accomplished some of its Made in China 2025 targets, such as patents and broadband coverage, and the government is shifting its focus to new infrastructure like 5G, an ultra-high voltage grid, software, biotech, semiconductors and higher-end components. Urbanization will remain a key focal point, but the Plan will emphasize the development of the surrounding suburbs and satellites of major cities rather than further densification of downtown.
Having achieved its goal of a “moderately prosperous society,” China aims to become an advanced social country with leading global influence. Anticipating a more adverse export market, the government seeks to boost consumer spending and promote self-sufficiency in food and resources, which China Equity Strategist David Cui sees benefiting consumer product and service providers, building materials, food, minerals, and renewables as well as strengthening the renminbi. Funneling investments in semiconductors, 5G, AI, blockchain and quantum computing could bolster China’s tech/communication sectors and lessen US reliance, but may catch Hong Kong and Taiwanese companies in the crossfire.
To better integrate with the global economy, China is gradually deregulating its finance sector, benefiting brokers, asset managers and innovative companies seeking capital. David anticipates China adopting de-risking policies to lessen volatile cycles and to move more quickly to de-leverage when necessary.
In the digital age, data is currency, and new, alternative data sources have come into focus accordingly. BofA Global Research has made use of this data, and the Predictive Analytics team and Thematic Strategist Haim Israel have published an Alternative Data Primer which details some of their insights. According to the BofA Fund Manager Survey, 55% of assets under management are not using alt data, so the opportunity remains for investors to effectively incorporate it.
We lay out 10 alt data use cases including using quantitative and fundamental inputs to assess a company's ESG-related attributes and likelihood of experiencing stronger financial stability.
Demand for construction equipment has lagged the strong, but still fragile, consumer recovery. While Machinery analyst Ross Gilardi’s construction equipment dealer survey suggests the demand outlook from here is still somewhat “directionless”, the survey also indicated that inventories are low, something analysts have noted in other areas too, and a positive for construction equipment production going forward.
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