Nov 30, 2023

On Thursday, the Chinese blue-chip index of 50 stocks will look for a low with manufacturing numbers. 

CHINA-50-–-Daily-Chart

CHINA 50 – Daily Chart

The CHINA 50 index trades around 11,690 and that is close to the October lows for a potential double bottom.  

Thursday will bring Chinese manufacturing figures at 9:30 am HKT. According to a Reuters poll, the country’s manufacturing activity is expected to contract. It is a challenging climate for factory owners who struggle for orders at home and abroad. 

The official purchasing managers’ index (PMI) is expected to have improved to 49.7 in November from last month’s unexpected drop to 49.5. The estimate from a Reuters majority is for the index to remain below 50. 

The 50 number is critical as it marks the difference between expansion and contraction. If China posts a small surprise on manufacturing, it would likely mean a jump above 50, which would excite analysts. 

Economists still see a country struggling to find growth despite some positive signs in October’s data. The world’s second-largest economy has disappointed in its ability to create a post-COVID solid recovery. That has also been down to external issues as global economies struggle. Some government policy support measures have had a modest effect, but the economy has rebounded well from property issues. 

Profit growth at China’s industrial firms shrank last month, following an 11.9% increase in September and a 17.2% gain in August, which analysts said was due to input costs. However, the sluggish economy has analysts worried that China may begin seeing Japan-style stagnation later this decade unless policymakers take steps to push the economy to a household consumption model. 

On Tuesday, China’s central bank leader said that he was “confident that China will enjoy healthy and sustainable growth in 2024 and beyond” but added that structural reforms were needed to reduce the reliance on infrastructure and property. Advisers have said the government will need to implement further stimulus if it wants to sustain an annual economic growth target of ‘around 5%’ next year, which would match this year’s goal. 

That is the long-term outlook, but the short-term is a manufacturing figure expected to come in just shy of the expansion level. An upside surprise could spark a price low and rally in Chinese stocks.

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