Monday, May 2, 2011

China PMI Heralds Further Policy Tightening and Possible Opportunities

China's April PMI stats just came out and were more or less flat compared to March. The official CFLP manufacturing PMI came in at 52.9 in April, down slightly from 53.4 in March, and below the Bloomberg consensus of 53.9. The preliminary HSBC/Markit reading was 51.8, the same as the March reading. The readings show the manufacturing sector in China still in expansionary mode, which bodes well for the Chinese economy. Paradoxically perhaps, in the short term it will likely mean further monetary policy tightening with an increasing likelihood of an additional interest rate hike as the economy proves relatively resilient to the inflation fighting efforts to date.

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