Amy Yuan Zhuang, chief analyst at Nordea Markets, notes that China’s manufacturing activity staged a strong recovery in March, as showed by the Caixin/Markit and official manufacturing PMIs at 50.8 and 50.5, respectively.
Key Quotes
“Both readings surprised consensus expectation on the upside, and the Caixin PMI was higher than even the most optimistic forecast.”
“The improved momentum can likely be attributed to the expectation of the trade war being ended soon and increased government stimulus. This is reflected by the v-shaped rebound in domestic and overseas new orders. The increased production of excavators is a proxy for more infrastrucutre projects and generally higher construction growth.”
“The good news supports our view that China will not likely see a sharp disorderly slowdown this year. However, there is a possibility that the strong data also has something to do with seasonality.”
“The CNY and CNH were moderately strengthened. Chinese equities reacted more positively with a gain of more than 2%. The improved sentiment helps to stabilise the financial markets and might play a positive role in the US-China trade negotiations, as Beijing will not likely stand in the way for allowing the market to strengthen the CNY versus the USD.”
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