🇨🇳 China’s choppy

What’s going on here?

Data out on Wednesday suggested that China’s slump has settled in for an extended stay.

What does this mean?

Rewind to the beginning of this year, and China’s economy was seriously flexing its muscles. But the country's fallen pretty far since then: investment and industrial profit were both on the decline in April, and retail sales didn’t exactly blow the roof off either. And May has continued that dreary trend: one measure of manufacturing activity sank to the lowest figure recorded this year – a reflection, in part, of a global dip in demand for goods. And the service sector, the linchpin of China’s recovery, is seeing its growth falter too, which could spell serious trouble.

Why should I care?

The bigger picture: Great stall of China.

This change in China’s economic stride is increasing the risk of a downward spiral, triggered by businesses and consumers alike. After all, purse strings could tighten now there's less money coming in, leading folk to spend and invest more grudgingly. Economists, at any rate, are already nudging their growth forecasts down to 5.5%. And while that’s still higher than the government’s 5% goal, it’s a chunky downgrade from the 6%-and-up target they were cheerleading for a few months back. Mind you, though, if the government wants to zhuzh up the economy, it may have to make good on some of its much-rumored but little-seen economic support programs.

For markets: Injured index.

If the government does step up and act decisively, it could rekindle Chinese markets and present an attractive buying opportunity for investors. But after this prolonged period of uncertainty, a lot of folks’ patience seems to be wearing thin. Just take a look at Hong Kong’s Hang Seng Index, which tracks a bunch of big mainland companies: it’s already dropped well into “bear market” territory, down 20% from its peak back in January.

What’s going on here?

The FTSE 100 confirmed its quarterly reshuffle this week, with some not-so-subtle changes.

What does this mean?

The FTSE 100 is home to the UK’s heftiest public companies, serving as a barometer for both Britain's corporate landscape and economy. And because companies can go from high-flyers to belly-floppers overnight, the FTSE 100 gets a regular spruce-up, promoting stocks that have bulked up and saying cheerio to slackers.
This time around it looked like Ocado, the online grocery delivery firm, was poised for an exit. But its partnership with Marks & Spencer – which posted impressive results last week – seems to have given Ocado the legs it needed to narrowly avoid a departure. Instead, British Land was taken out, falling foul of a slump in the commercial property space that it calls home. Taking the firm’s place was the engineering firm Imperial Metal Industries, staging a comeback after a nigh-on-ten-year hiatus.

Why should I care?

For markets: Lost and fund.

Billions of dollars are invested in FTSE 100-tracking funds, which have to buy into any stock that enters the index. And some investors try to predict those new entries, buying their shares early and hoping for a profit when the funds follow suit. But it’s not all fun and financial windfalls: companies that leave the FTSE 100 could see their share prices fall even further too, as funds that track the British index suddenly ditch their shares en masse.

Zooming out: London calling.

UK stock markets have been finding it hard to draw in new companies and hang onto existing ones. But WE Soda, the world's top producer of natural soda ash, has opted to list in London over New York – a rare victory for the British capital. With an estimated valuation of $8 billion, WE Soda could break London’s dry spell of significant listings and might even enter the FTSE 100 in due course.