RPT-SCENARIOS-How will markets react to China's Q1 GDP data?
(Repeats story ahead of data release with no change to text)
HONG KONG, April 15 (Reuters) - China's first quarter gross domestic product data on Thursday will be scrutinised by investors who have been buying stocks, regional currencies and commodities in anticipation of a China-led global rebound.
The number will indicate the extent to which stimulus spending is spurring growth, which should in turn, boost demand for commodities, profit for companies and give carry trade investors the confidence to bet on commodity currencies.
Following are some of the ways in which the news could play out in markets on Thursday.
MEETS EXPECTATIONS FOR 6.3 PCT GROWTH
Year-on-year GDP growth near the market expectation of 6.3 percent, the slowest pace in at least 16 years, would be a green light for investors to take profits on the 27 percent rise in the MSCI Asia Pacific ex Japan index .MIAPJ0000PUS since March.
The leading indicators of growth that helped propel regional stocks -- explosive credit growth in the first quarter and the first positive reading of an official survey of the manufacturing sector last month since September -- were already factored into share prices, analysts said.
That is especially true after the unexpected drop in March U.S. retail sales on Tuesday fed doubts about the recovery.
The threshold for a positive surprise in terms of more stimulus spending is very high given that Beijing has already allocated $585 billion to bolster the economy.
"We don't expect any reversal in the policy direction but it is equally unrealistic for the market to always expect some sort of extreme and unprecedented policy surprise from the Chinese government," said Fan Cheuk Wan, head of Asia Pacific research with Credit Suisse in Hong Kong.
Rolling 20-day returns in many Asian stock markets hit 3-month highs last week and have been drifting lower since.
Twenty-day returns in Taiwan's stock market, which led regional markets based on Chinese "rush orders" for and other gadgets, have converged with South Korea and Hong Kong at 17 percent, also suggesting the rally has matured.
Commodity prices, which have surged off their lows hit earlier this year, are generally overbought from a technical perspective and data at or below expectations is likely to trigger profit taking as well.
UPSIDE SURPRISE
The most bullish forecast in Reuters poll of 21 economists was for GDP growth of 6.9 percent in Q1, which would mean Beijing is well on its way to achieving its stated target of 8 percent this year.
A number significantly above forecast could spark additional strength in both equity and commodity markets, though short-term technical indicators and valuations will limit any rise.
Copper prices are in striking distance of six-month peaks touched earlier this week in Shanghai SCFc3 and London MCU3 -- about 5 percent above current levels.
For a graphic showing the relationship between copper prices and China's industrial output, click: here
In stock markets the same sectors that have been popular in the last month could get an extra bump, such as Taiwanese electronics and plastics companies, Japanese and Korean autos and some raw materials producers.
However, short-term overbought signals are flashing red. For example, most stock markets in Asia the 14-day Relative Strength Indices (RSI) are well above 60 and in many metals, RSIs are above 70.
Tech stocks may be only one boat lifted by the wave of confidence that an unexpectedly strong GDP number could inspire Currencies such as the Australian dollar that benefit from the risk taking employed in carry trades could also surge. The tech sector in Asia ex-Japan in the last 90 days has been trading at a 0.93 correlation with Australian dollar/yen, according to Reuters data.
DOWNSIDE SHOCKER
With so much optimism priced into market expectations for China, a big downside surprise is likely to see large-scale unwinding of long positions.
Short selling in stocks, which has stayed relatively quiet for the last five weeks, could rebound. For the last few weeks, turnover of average daily shorts on the Hong Kong stock exchange has been about 5.6 percent of total volume, but could creep back to 7 percent, roughly its average for the first quarter.
In the foreign exchange market, weakness in equities could trigger an unwinding of carry trades and weigh on emerging Asian currencies such as the Korean won, which have benefited from a revival in risk appetite in the last month.
UNEXPECTED STRENGTH IN COMPONENTS
Direct plays on stocks that stand to benefit from China's stimulus could get a near-term boost if figures on newly increased fixed investment in March continue to pull up the total investment number.
In February, new investment surged 59 percent on an annual basis, the most in about two years, as stimulus money was put to work. Railway construction companies, builders and cement producers have all been popular picks.
Still, solid fixed investment but a much lower than forecast headline GDP figure could spread fear that Beijing's efforts were not getting to the real economy fast enough to offset depressed global demand. That would be negative for risk.
UNEXPECTED WEAKNESS BELOW THE HEADLINE
Any weakness in public investment will unlikely be paired with a strong headline number, so the market would likely react negatively by offloading high-beta stocks and commodities.
Export weakness and soft business and residential investment combined with less-than-stellar public investment numbers will call into question the belief that China's efforts so far are sufficient to support the economy.
Speculation will also increase about the pressing need for additional stimulus measures to boost domestic consumption. (Additional reporting by Nick Trevethan in SINGAPORE)
