Chinese stocks rose over the last two days despite the weakest PMI data in China since 2022.
The CHINA 50 index bounced from lows at 13,147, but the resistance is higher at 13,807. The 13,000 level is key for a move lower.
The Caixin/S&P Global manufacturing purchasing managers’ index dropped to 48.3 in May from 50.4 in April, missing analysts’ expectations in a Reuters poll, with the first contraction since September. It was also the lowest reading in 32 months for the indicator as tariffs bite.
Stocks bounced because the figure was largely in line with China’s official PMI data released on Saturday that said factory activity was lower for a second month. Two weeks after the trade negotiations between the US and China, Treasury Secretary Scott Bessent said on Thursday the talks are “a bit stalled.”
China’s Premier Li Qiang last week said his country was looking at new policy tools, including some “unconventional measures”.
According to the latest Caixin survey, new export orders shrank for the second straight month during May. It was also the fastest pace of decline since July 2023.
Robin Xing, chief China economist at Morgan Stanley, said the data shows that supply demand imbalances remain a factor.
“There is growing rhetoric about the need for rebalancing, but recent developments suggest the old supply driven model remains intact. Thus, reflation is likely to remain elusive”.
Chinese stocks remain trapped in the consolidation phase with no imminent sign of a breakout. Aluminum, nickel, and copper fell on the London Metal Exchange due to demand expectations, and the trends continue to weaken foreign investment flows into Shanghai stocks.
