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Mitul Kotecha, senior emerging markets strategist at TD Securities, notes that China’s manufacturing PMI remained in expansion at 50.2 in December (TD 50.4, market 50.1), the same as in November.

Key Quotes

“The components were generally upbeat, with output rising to 53.2, its highest since June 18, while new orders remained in expansion at 51.2. However, employment remained in contraction at 47.3. Input prices rose to their highest since May, suggesting lessening deflationary pressure, but output prices remained in contraction, indicating that profits continue to be squeezed.”

“Trade prospects strengthened as export orders moved into expansion for the first time since May 18. Sentiment for medium-sized firms moved into expansion for the first time since Aug 18, suggesting upside risks for the Caixin PMI.”

“The announcement of the US-China trade deal and elimination of the December 15 tariffs likely supported manufacturing sentiment. Similarly credit and loan metrics have taken a turn for the better, while construction activity is picking up and auto sector output volumes are rising. There are also signs of a nascent recovery in the tech sector. CNY/CNH are likely to remain supported in the wake of the data.”