Curb your enthusiasm. One month does not make a trend and investors know as much. Hence the strong growth in China's trade surplus led by a jump in exports in December barely budged the Hang Seng index on Thursday.
After all, the 14-per-cent growth in exports in December came off the back of very weak growth in November. And continued strong growth is not guaranteed. The purchasing managers' index for export orders, a fair indicator of future performance, was flat in December when it slipped 2 basis points to 50. And that is in spite of a greater dependence on emerging markets such as Southeast Asia, where exports to the region jumped by a fifth last year.
What is more, China's economy is not as dependent on exports as it used to be. Economic output is still expected to reach almost 8 per cent for 2012 even though net exports have been a drag on growth for most of the year. For example, they reduced output by as much as one percentage point in the second quarter, while the economy still ran a trade surplus, compared with 4 percentage points each of growth from investment and consumption.
This shift makes it more difficult for investors to play adjustments in China's export performance. Any trickle down to manufacturing sectors then to wage growth and consumption is a long-term bet. And investing more directly is problematic. Li & Fung, which sources products from China for the likes of Wal-Mart and Target, should in theory benefit when exports improve. Yet Li & Fung has underperformed its benchmark over the past six months as it struggles to extract value as it buys up new sourcing groups. And as for manufacturers such as Foxconn, most of the value is extracted by its clients such as Apple. Booming exports mean little without margins.