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.
As 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:
- the “over-invoicing” issue export decline look worse than it is
- 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
