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Analysts at Nomura point out that China’s official manufacturing PMI fell markedly, to a much weaker than expected 50.8 in September from 51.3 in August (Consensus and Nomura: 51.2).

Key Quotes

“This is also below the 51.3 average for January-August 2018 and the average of 51.6 in 2017, suggesting growth momentum continues to lose some steam.”

“The new export orders sub-index fell dramatically to 48.0 in September from 49.4 in August, implying rising uncertainty on the export outlook. The input price sub-index rose to 59.8 while the output price sub-index was unchanged at 54.3 – however, we expect PPI inflation to moderate further in September given a high base last year.”

“The Caixin PMI also fell to a weaker than expected 50.0 in September from 50.6 in August (Consensus: 50.5; Nomura: 50.4), lower than both the Jan-Aug average of 51.1 and the 2017 average of 50.9.”

“Looking ahead, we expect more easing/stimulus measures to be rolled out in the coming months in an effort to offset both external and domestic headwinds. Easing measures, in our view, are likely to include but not be limited to, value-added tax cuts and one more 50bp reserve requirement ratio (RRR) cut at some point this year.”