Back
23 Apr 2014
Asia EM Express: China's HSBC Manufacturing PMI improves slightly but slowdown concerns remain
FXStreet (Łódź) - China announced on Tuesday that the reserve requirement ratio for rural commercial banks would be reduced by 200bp and for rural cooperative banks by 50bp, effective from April 25. The move, signaled by the PBoC last week, is aimed at spurring growth in the country through boosting lending in the agricultural sector.
According to Zhiwei Zhang, Research analyst from Nomura “the amount of liquidity released to be RMB80-90bn, which is still small and effectively insignificant given the size of the economy, but the move does serve to send the signal that the government is more concerned about the economy as growth slows.”
“This move reinforces our view that the PBoC will cut RRR for all banks in Q2. If it does so, the liquidity released would be significant at around RMB550bn, by our estimates.”
Economic data
China's preliminary HSBC Manufacturing PMI, the highly awaited piece of data released on Wednesday, came in slightly lower than expected at 48.3 in April, vs the consensus of 48.4, but up from 48.0 recorded in March, which indicates that the slowdown is moderating.
Opinions about this release are divided however with Nomura's Zhiwei Zhang suggesting that the rise was due to seasonal effects and that it doesn't signal “any sort of turning point for
the economy.” The analyst adds that “growth momentum is on a downtrend, with
GDP growth likely to slow to 7.1% in Q2 as the property sector shows signs of further
weakening.”
Also on Wednesday Statistics Singapore revealed that year-on-year CPI accelerated to 1.2% in March from 0.4% in February, above expectations of 1.1%.
“Data reinforces the message that inflation has bottomed and a low-base effect will support it from March,” Prakash Sakpal from ING believes.
“Absent any near-term relaxations in the property or auto sectors, we expect headline inflation to remain near the low end of the MAS’s 1.5-2.5% forecast this year (revised from 2-3% in April).”
On Tuesday Hong Kong informed that inflation remained at 3.9% in March, after tumbling from 4.6% in February. The country's Census and Statistics Department also released the Unemployment Rate which was unmoved at 3.1% for the second running month in March.
Technicals
The Chinese yuan dropped to a 16-month intraday low of 6.2467 against the greenback on Wednesday, as concerns about the country's economic slowdown persisted and companies purchased dollars to hedge against losses. Even the fact that the PboC set its official midpoint slightly higher at 6.1599, compared with 6.1610 on Tuesday.
On Tuesday daily FXStreet Trend Index was slightly bullish, with the OB/OS Index overbought. RSI was at 72 at the last close, and has fallen to 52 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 91 pips, with ATR (14) expanding at 110 pips. The 1D 200 SMA was at 6.1133, while the 1D 20 EMA was at 6.2109.
According to Zhiwei Zhang, Research analyst from Nomura “the amount of liquidity released to be RMB80-90bn, which is still small and effectively insignificant given the size of the economy, but the move does serve to send the signal that the government is more concerned about the economy as growth slows.”
“This move reinforces our view that the PBoC will cut RRR for all banks in Q2. If it does so, the liquidity released would be significant at around RMB550bn, by our estimates.”
Economic data
China's preliminary HSBC Manufacturing PMI, the highly awaited piece of data released on Wednesday, came in slightly lower than expected at 48.3 in April, vs the consensus of 48.4, but up from 48.0 recorded in March, which indicates that the slowdown is moderating.
Opinions about this release are divided however with Nomura's Zhiwei Zhang suggesting that the rise was due to seasonal effects and that it doesn't signal “any sort of turning point for
the economy.” The analyst adds that “growth momentum is on a downtrend, with
GDP growth likely to slow to 7.1% in Q2 as the property sector shows signs of further
weakening.”
Also on Wednesday Statistics Singapore revealed that year-on-year CPI accelerated to 1.2% in March from 0.4% in February, above expectations of 1.1%.
“Data reinforces the message that inflation has bottomed and a low-base effect will support it from March,” Prakash Sakpal from ING believes.
“Absent any near-term relaxations in the property or auto sectors, we expect headline inflation to remain near the low end of the MAS’s 1.5-2.5% forecast this year (revised from 2-3% in April).”
On Tuesday Hong Kong informed that inflation remained at 3.9% in March, after tumbling from 4.6% in February. The country's Census and Statistics Department also released the Unemployment Rate which was unmoved at 3.1% for the second running month in March.
Technicals
The Chinese yuan dropped to a 16-month intraday low of 6.2467 against the greenback on Wednesday, as concerns about the country's economic slowdown persisted and companies purchased dollars to hedge against losses. Even the fact that the PboC set its official midpoint slightly higher at 6.1599, compared with 6.1610 on Tuesday.
On Tuesday daily FXStreet Trend Index was slightly bullish, with the OB/OS Index overbought. RSI was at 72 at the last close, and has fallen to 52 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 91 pips, with ATR (14) expanding at 110 pips. The 1D 200 SMA was at 6.1133, while the 1D 20 EMA was at 6.2109.