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China’s official purchasing manager’s index (PMI) report is out at 9:00 p.m ET tonight.After the HSBC flash PMI tumbled to 47.5 is August, “a plainly awful” report according to Societe Generale’s Wei Yao, and official PMI declined to 50.1 in July, concerns are that the official number could fall below the contractionary level of 50.
Investors will watch sub-indices like new orders and new export orders closely as well, for signs of improvement or deterioration.
Bank of America’s Ting Lu expects manufacturing PMI to decline to 49.7 in August, “driven by sub-indices of new orders, output, and employment”.
Economists polled by Bloomberg expect manufacturing PMI to ease to 50.
Chinese stocks have been taking a beating on concerns that aggressive policy easing is unlikely. But if August data continues to show deterioration in the economy, it could signal good news for markets, since it could give policymakers a window for policy easing and room for reserve requirement ratio cuts in September and October.
Lu writes, “though we think the scale of policy easing/stimulus will not be impressive at all, we believe they should be market positive.”