1 May 2014
Asia EM Express: China's Manufacturing PMI rises slightly but fails to calm slowdown woes
FXStreet (Łódź) - China's April Manufacturing PMI, released on Thursday, showed a pickup for the second running month, but still slightly below expectations and so modest that it wasn't sufficient to dispel concerns about the country's economic slowdown.
The reading ticked up to 50.4 in April from 50.3 in March and slightly below consensus of a rise to 50.5. Nomura's Research analysts are not convinced that the slight PMI expansion means that China will experience stable growth from now on. They point out that “the 0.1 percentage point (pp) rise in the official PMI is weaker than the historical average of a 0.6pp rise in April over the period 2005-13 (excluding 2009 due to the global financial crisis)” and add that “the business expectations index dropped by a significant 3.1pp to 59.6 in April, suggesting that firms still lack confidence.”
“We continue to expect growth to slow to 7.1% y-o-y in Q2 from 7.4% in Q1, with risks to the downside as leading indicators in the property sector fell sharply in Q1. We expect the government to loosen fiscal and monetary policy in the next few months. The fiscal deficit will rise, in our view, and the reserve requirement ratio will be cut by 50bp in May or June, and again in Q3.”
Meanwhile, Thai inflation accelerated to 2.45% in April, from 2.11% in March and above expectations of a 2.29% rise.
Korea's trade balance numbers, published by Korea's National Statistical Office, showed that the $4.19B surplus recorded in March widened to $4.46B in April, against forecasts of narrowing to $4.13B. Exports jumped 9% from 5.1% while Imports increased 5% following 3.6%.
On Wednesday Korea informed that CPI growth slowed down to 0.1% in April month-on-month, from 0.2% in March, in line with forecasts. On an annual basis inflation picked up to 1.5% from 1.3%.
Technicals
China's yuan fell to an 18-month low on Wednesday, posting a fourth consecutive monthly decline, due to slowdown concerns. On Thursday, at the moment of writing USD/CNY was unchanged, sitting at 6.2590.
On Wednesday the daily USD/CNY FXStreet Trend Index was slightly bullish, with the OB/OS Index extremely overbought. RSI sat at 77 at the last close, and has fallen to 52 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 188 pips, with ATR (14) shrinking at 95 pips. The 1D 200 SMA was at 6.1166, while the 1D 20 EMA was at 6.2299.
Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi signals: “The Chinese yuan continues to remain on a weaker footing in the near-term with the USD/CNY rate trading around 1.7% above the daily fix.”
The reading ticked up to 50.4 in April from 50.3 in March and slightly below consensus of a rise to 50.5. Nomura's Research analysts are not convinced that the slight PMI expansion means that China will experience stable growth from now on. They point out that “the 0.1 percentage point (pp) rise in the official PMI is weaker than the historical average of a 0.6pp rise in April over the period 2005-13 (excluding 2009 due to the global financial crisis)” and add that “the business expectations index dropped by a significant 3.1pp to 59.6 in April, suggesting that firms still lack confidence.”
“We continue to expect growth to slow to 7.1% y-o-y in Q2 from 7.4% in Q1, with risks to the downside as leading indicators in the property sector fell sharply in Q1. We expect the government to loosen fiscal and monetary policy in the next few months. The fiscal deficit will rise, in our view, and the reserve requirement ratio will be cut by 50bp in May or June, and again in Q3.”
Meanwhile, Thai inflation accelerated to 2.45% in April, from 2.11% in March and above expectations of a 2.29% rise.
Korea's trade balance numbers, published by Korea's National Statistical Office, showed that the $4.19B surplus recorded in March widened to $4.46B in April, against forecasts of narrowing to $4.13B. Exports jumped 9% from 5.1% while Imports increased 5% following 3.6%.
On Wednesday Korea informed that CPI growth slowed down to 0.1% in April month-on-month, from 0.2% in March, in line with forecasts. On an annual basis inflation picked up to 1.5% from 1.3%.
Technicals
China's yuan fell to an 18-month low on Wednesday, posting a fourth consecutive monthly decline, due to slowdown concerns. On Thursday, at the moment of writing USD/CNY was unchanged, sitting at 6.2590.
On Wednesday the daily USD/CNY FXStreet Trend Index was slightly bullish, with the OB/OS Index extremely overbought. RSI sat at 77 at the last close, and has fallen to 52 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 188 pips, with ATR (14) shrinking at 95 pips. The 1D 200 SMA was at 6.1166, while the 1D 20 EMA was at 6.2299.
Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi signals: “The Chinese yuan continues to remain on a weaker footing in the near-term with the USD/CNY rate trading around 1.7% above the daily fix.”