Investors Keep An Eye On China’s Flash PMI

09.48 AEST, Tuesday 23 April 2013

Investors Keep An Eye On China’s Flash PMI
By Ric Spooner (Chief Market Analyst, CMC Markets)

Investor outlook on the Chinese economy appears delicately balanced. The extent of the reaction to seemingly minor misses on expectations by the GDP and other figures released last week suggests increasing concern that China’s economy may in fact underperforming the official numbers. There are also concerns that the economy has the potential to weaken further as authorities wrestle with the contradictory imperatives of maintaining growth but restraining credit and as overcapacity in some areas of manufacturing weighs on overall growth.

Against that background, today’s release of the PMI figure has the potential to be one of those numbers with a significant influence on the market. General expectations are for a reading of around 51.5 which is broadly indicative of moderate growth in the manufacturing sector. Anything lower, moving towards 50, is likely to concern investors particularly in the resources sector. A reading around 52 though would be a relief. While not conclusive it would encourage those with a more optimistic view that the manufacturing sector is bottoming out and likely to sustain moderate growth rates as the overall economy rebalances towards the domestic sector.

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ENDS

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