Asia Insights: China: The PMI continued to improve in November

Fixed Income | Asia Ex-Japan NOMURA 02 December 2012 Asia Insights: China: The PMI continued to improve in November ·China’s official PMI rose further to 50.6 in November from 50.2 in October, lower than the consensus forecast of 50.8. ·Both the new orders and the production sub-indices continued to improve. ·This lends further support to our view of a strong economic rebound in Q4. China’s official PMI rose further to 50.6 in November from 50.2 in October (Consensus: 50.8; Nomura: 51.0, Figure 1). The improvement of the official PMI in November is consistent with the positive signals provided by other leading indicators. The HSBC flash manufacturing PMI also jumped to 50.4 in November from 49.5 in October, its first time above 50 in 13 months. The MNI China business sentiment index also rose in November to 53.78 from 51.86. Signals from sub-indices are also encouraging. The new orders sub-index jumped in November to 51.2 from 50.4, which is a positive signal for future production (Figure 2). With finished goods inventory up by 0.7 points, the index of new orders minus finished goods inventory rose slightly to 2.4 from 2.3, which suggests that the official PMI may continue to improve in December. The new export orders sub-index rose to 50.2 in November, the first time in the last six months that it has been above the boom-bust line of 50, which bodes well for China’s exports in the coming months. The production sub-index also rose further to 51.2 from 50.4. Although the input price sub-index fell to 50.1 from 54.3, it remained above 50 which implies that inflationary pressures remain. These positive signals suggest economic growth will continue to improve in November. We expect the policy stance to maintain its current loosening bias with total social financing remaining above RMB1trn in each month for the rest of 2012, and GDP growth rebounding to above 8% in Q4 and H1 2013 from 7.4% in Q3. The Central Economic Working Conference in mid-December will set the tone for 2013’s policy stance.

Source: CEIC and Nomura Global Economics

Source: CEIC and Nomura Global Economics