FUNCTIONSFOR THE MARKET

ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 01

TARGETING 7.5 PERCENT GROWTHChina will tolerate slower growth as it transforms its investment-led economy into one driven by services and consumption, Premier Li Keqiang said in March. Economists have cut their forecasts for 2013 to an expansion of 7.5 percent from 8.1 percent at the start of the year, according to the median in a Bloomberg survey. That’s in line with the government’s GDP target {ECFC CN<GO>}. Retailers, automakers and tourism centers such as Macau may be among potential winners if China is successful at spurring consumer spending {BI CHINA NSN MS802L6KLVR4 <GO>}. Analysts predict more economic reforms will be announced at the Communist Party’s Central Committee meeting in November.

REBOUND IN CHINESE EQUITIESChinese stocks also bounced back in August faster than most emerging-market equities. The Shanghai Shenzhen CSI 300 Index has gained more than 8 percent since June 26, though still some 60 percent below its October 2007 peak {SHSZ300 Index TRA<GO>}. The CSI 300 Index is valued at about 11.4 times earnings, down from 47.4 in September 2007.

TRACKING THE YUAN Leaders helped restore confidence in Chinese assets in July by promising to keep growth from slipping below 7 percent. They have also overseen a managed appreciation of the yuan versus the dollar. The Chinese currency has

gained 1.8 percent this year, the best performance of 24 emerging-market currencies {WCRS<GO>}. Meanwhile, the government has expanded access to domestic markets by loosening restrictions on offshore yuan trading in Hong Kong and expanding access for foreign institutional investors. The offshore yuan has traded at a premium to the onshore currency for most of the year, indicating investors expect further appreciation.

MONITORING LIQUIDITY AS PBOC SHIFTS POLICYPolicy makers are also addressing financial-sector risk, even as growth slowed and fears rose about the end of U.S. quantitative easing. Interest rates spiked as the People’s Bank of China refrained from relieving an end-of-quarter cash shortage and called on lenders to rein in credit risk. The seven-day fixing repurchase rate has since fallen to below 4 percent, after reaching a record 10.77 percent on June 20 {CNRR007 Index GP<GO>}. The one-year interest-rate swap remains above historical levels, which may indicate markets anticipate tighter liquidity conditions. The PBOC has increasingly used open-market operations to manage the supply of cash, instead of adjusting reserve requirements and policy rates {BI BANKA ASMOC |1213-2-W-DATA|W12 <GO>}. It eliminated the floor on lending rates in July, which may signal more liberalization.

ANTICIPATING SLOWER GROWTH IN CHINAThe Chinese economy is slowing to a forecast rate of 7.5 percent for 2013 as the government seeks to curb excessive lending and reduce reliance on exports. Bloomberg functions help track GDP forecasts and identify sectors that stand to gain from Chinese economic reforms. Use Bloomberg tools to monitor central bank actions and assess the impact on interest rates, banking, equities markets and offshore flows.

The Yuan Has Strengthened Against the Dollar in 2013

Consensus GDP Forecast Has Fallen Toward Official Target

FUNCTIONSFOR THE MARKET

ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 02

BALANCING INVESTMENT RISK BY TRACKING CHINA’S DATAThe Bloomberg Industries China dashboard houses datasets to help monitor macroeconomic trends.Run {BI CHINA<GO>} and click ‘Consumerization’ in the left-hand menu for analyses of key consumer industries. China’s auto sales are on pace to reach a record in 2013. Spending growth by Chinese visitors to Macau accelerated to 14 percent in the second quarter and retail spending has also surged 12.3 percent in July from a year earlier. Click ‘Demographics’ for details on the urban migration helping to fuel spending. Urban consumption has risen an annualized 14 percent since 2000, compared with 8 percent in rural areas.

— Jonathan Tycejtyce6@bloomberg.net,

and Tim Craighead tcraighead@bloomberg.net

TRACKING CHINESE LIQUIDITY CONDITIONS, POLICY, IMPACTBloomberg Industry’s Asia Bank dashboard helps track open-market operations by the People’s Bank of China as it seeks to prevent credit bubbles. Run {BI BANKA<GO>} and select ‘PBOC Watch/China’ from the left-hand menu within the ‘Data Library.’ Click the ‘52) Key Dataset’ and ‘71) Policy Tools’ tabs to monitor reverse repurchase agreements by week. Use the ‘72) Rates (Current)’ tab to see the impact of central bank actions on lending rates. The seven-day fixing rate has fallen to below 3.5 percent, close to levels seen a year ago, after spiking 10.77 percent in June. Keep track of lending activities using the ‘53) China’ and ‘71) Banking System’ tabs.

— Jonathan Tycejtyce6@bloomberg.net

FUNCTIONSFOR THE MARKET

ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 03

OPTIMIZING CHINESE STOCK PORTFOLIOS WITH PORTBloomberg’s new China A Factor Model within the Portfolio & Risk tool helps construct a Chinese equities portfolio that would have outperformed the Shanghai Shenzhen CSI 300 Index by 18 percentage points since the end of 2010, with lower total risk.Run {PORT<GO>} to begin optimizing a Chinese equities portfolio. Enter the benchmark ticker in both the ‘Port’ and ‘vs’ boxes, and then click ‘14) Trade Simulation’ to launch the optimizer. For details on the optimization and backtesting, see {NSN MSMG7R6JTSEU <GO>}.

— Andrew Eliot aeliot@bloomberg.net, Dorothy Chan dchan156@bloomberg.net,

Kahfai Kok kkok3@bloomberg.netand Erik But ebut1@bloomberg.net

MONITORING THE SLOWDOWN IN DIM SUM BOND ISSUANCEIssuance of Dim Sum bonds has slowed since June, as companies outside of China found it less profitable to raise debt in offshore yuan to meet funding needs in local currencies. To track bonds issued in the offshore Chinese currency, run {SRCH<GO>}. Click ‘30) Example Searches,’ select ‘Dim Sum Bonds (Ex CD’s) and hit ‘1) Load Search.’ Add Western Europe and North America as the countries of incorporation, then hit ‘1) Results.’ Click the ‘Matrix’ tab and compare the total amount issued by month. Issuance picked up slightly in August, as the yuan resumed strengthening and China’s economy showed signs of stabilization. Bond activity remains subdued compared with 2012. Companies issued $495 million in Dim Sum bonds in July of last year.

— Dorothy Chan dchan156@bloomberg.net

FUNCTIONSFOR THE MARKET

ANTICIPATING SLOWER GROWTH IN CHINA FFM<GO> // 04

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Paul Smithpsmith152@bloomberg.net+4420-3525-8653

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USING SDRV TO GAUGE USDCNY TRADE RECOMMENDATIONS The Chinese yuan recently hit a 19-year high against the U.S. dollar.To see how the options marketis positioned run {SDRV <GO>}for Bloomberg’s SDR DerivativesVolumes tool. Click on the gray “FX” tab, then the “Options” tab and click View Strike/Maturity. Enter USDCNYin the yellow box next to “singlesecurity” and enter the date rangeof 12-Aug-2013 through 15-Aug-2013. The blue dots (calls) outnumber the green dots (puts) indicating a potential bullish bias on USDCNY.

— Alex Wenham awenham@bloomberg.net

IDENTIFYING COMPANIES WITH EXPOSURE TO CHINESE GROWTHBloomberg tools help identify companies based outside of China with sales exposure there.Run {EQS /SAMPLE 10620963 /RESULTS <GO>} to screen for the world’s largest 2000 companies’ exposure to China based on the latest yearly results. The results show that 14.4 percent of Apple’s revenue comes from China. Samsung also gets about 14 percent of its revenue from China. See the FFM article at {NSN MSS7386JIJUO <GO>} for fulll step-by-step instructions about building this screen.

— Constantin Cosereanuccosereanu@bloomberg.net