The temporary rebound in the Chinese stock market from the end of December 2023 was again quickly erased after weaker PMI readings from the Chinese economy. China's PMI reading, for December, indicated 49 points versus 49.6 forecast by Bloomberg analysts and appeared to coincide with the data, from June 2023. The year 2023 was a dismal one for the Hang Seng, with overseas equity market investment at its lowest in eight years, and the opening of 2024 is taking place in a weak mood. Also emerging markets are under pressure from a strengthening US dollar.
- Sub-index readings for services pointed to an ongoing slowdown, below 50 points with a slight positive surprise in the non-manufacturing reading, which came in at 50.4 versus 50.2 in November thanks to higher activity in the construction sector, driven mainly by government investment. The construction activity index rose to 56.9 from 55 in November, driven by state investment. Chinese factory activity according to official data fell to its lowest level in six months in December. The Factory Orders Index fell to 48.7 and the index measuring export orders fell to 45.8.
Caixin vs. official data
- Data reported by the private Caixin agency stood in opposition to the official readings, and suggest a slight rebound in factories. Caixin's manufacturing managers' index rose to 50.8 in December from 50.7 in November.That's the highest reading since August, better than Bloomberg's estimate.
- However, both surveys include different sample sizes, geographic locations and types of companies. So far, Caixin data has tended to outperform the official results, last year. Caixin's better reading may be due to medium-sized and smaller companies omitted from the official survey, but it still doesn't change the overall picture of uncertainty.
- The real estate crisis is likely to hit the white goods and furniture sectors. NBS analysts stressed that in addition, the cold weather recently has put pressure on some services, such as air transport and hospitality. Some analysts expect the PBoC to cut rates in January to support the economy.
The CHN.cash index is losing sharply today and losing the bullish momentum from the end of last year. Source: xStation5
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China's service sector is recording its second weaker month in a row, and factory activity is at its lowest in six months. Source: Bloomberg Finance LP
Private agency Caixin's PMI survey, in contrast to official data, suggests the strongest rebound in factory activity in 4 months. Source: S&P Global, Caixin
