What The Heck Happened In China?

Includes: FXI, PGJ
by: Wall Street Strategies

By David Urani

One thing that we need to consider from Monday is what the heck happened in China. Obviously one of the key economic points of the day was China's PMI manufacturing index which grew to 53.1 from 51.0 and beat consensus expectations. This was the best reading since March of last year and really stands as a fairly encouraging piece of news considering the recent evidence of deceleration in China. That being said, one can't help but to remember that the HSBC previously put out their own version of Chinese PMI and it was a flop (down to 48.3 from 49.6), dipping further into the contraction zone (below 50).

In the end, it leaves one unconvinced of whether China's momentum is going up or down, and perhaps that is the state that its economy is in right now; teetering between acceleration and deceleration. What we can glean from the latest official PMI reading is, put simply, it was better than the HSBC and the fact that it did not decrease is a bit of a relief; to not be sure is better than to know things are worsening.

Yet one important thing to know is that the official PMI reading normally tends to rise by a couple percent each March due to seasonal factors. One could actually be disappointed to see that it didn't accelerate further. But maybe that's okay because this would indicate China is inching forward, just slowly enough that Premier Wen will still want to enact an effective stimulus.