What’s going on here?
China’s manufacturing sector is showing mixed signals as the Caixin/S&P Global PMI surged to 51.8 in June, while the official PMI reported a decline. Meanwhile, slow property price growth and fluctuating stock market performance spur calls for economic stimulus.
What does this mean?
The Caixin/S&P Global PMI’s rise to 51.8 – the fastest since May 2021 – and surpassing analysts’ forecasts shows robust health in the manufacturing sector. However, the conflicting official PMI report and slow growth in new home prices have bolstered calls for further economic support. China’s recent government measures seem to have had limited impact on the property sector, and while the Shanghai Composite Index saw a slight increase, broader mixed stock performance adds to the economic apprehension.
Why should I care?
For markets: Market reactions are mixed.
China’s blue-chip CSI300 Index saw varied sectoral performance, with financials up 0.52% and real estate surging 6.22%, yet consumer staples fell 1.26%. The tech sector also struggled, as seen in the Shenzhen Index dropping 0.41%, ChiNext Composite Index down 1.57%, and STAR50 Index dipping 1.53%. Despite these mixed signals, Chinese H-shares listed in Hong Kong edged up by 0.12%, and broader Asian markets remained modest, influenced by US interest rate outlook concerns.
The bigger picture: Will economic stimulus be the remedy.
Calls for economic stimulus in China are growing amid mixed manufacturing signals and tepid property market gains. This highlights broader concerns about the efficacy of current government measures in stabilizing growth. With the Asian market showing limited positive movement and the US interest rate outlook adding to global economic uncertainties, investors and policymakers alike are watching closely for new stimulus initiatives to bolster confidence and drive sustained growth.
