The Chinese bank’s so-called newsflow indicator — a four-week average of news articles related to a hard landing in China — this week climbed to the highest level on record, indicating market observers are as nervous as ever.
“At first glance, the strong increase in the number of hard-landing news articles could simply be viewed as a sign that the Chinese outlook is deteriorating rapidly,” SocGen strategists said in the report published on Thursday. “If that is the case, the indicator would be a precursor to rather dramatic changes in economic consensus that we have not seen so far.”
However, taking a more contrarian view, they argued that scenario likelywon’t be the case. The unprecedented stream of negative Chinese articles has in itself fueled collective fears, with the markets likely to have overreacted, the strategists said.