The markets must make a choice on Monday as to what China Purchasing Managers’ Index — official or the HSBC — they want to focus on and believe.
The official data released today by National Bureau of Statistics shows the Purchasing Managers’ Index (PMI) expanding to an 11-month high of 53.1 in March from 51 in February, beating forecasts of 50.5.
The HSBC PMI was also released today and came in very weak at 48.3 in March, down from 49.6 and the fifth successive month-on-month deterioration in manufacturing. The report notes for the first quarter as a whole, the index averaged its lowest reading since Q1 2009.
We’re not China specialists but we assume the HSBC seasonally adjusts the data and apparently gives more weight to trends in the export sector. Zhang Liqun, a researcher with the Development Research Centre of the State Council did seem to recognise the conflict with official data,
We would need to analyse the discrepancy between the PMI and the actual state of the economy.
We do know which data the market cheerleaders will be looking at and touting the no hard landing mantra, but many were also expecting or hopeful of more monetary easing over out of China this weekend, which the official data just doesn’t seem to confirm and give the PBOC cover.
Thus, with China’s growth prospects, at best, ambiguous if the official data can be trusted at all, coupled with no monetary move, shouldn’t markets be disappointed on Monday? Are they not efficient? Or is this just our confirmation bias because we’re closet China panda bears?
What we have to get right as traders is not how we view the data, but how we think the market will perceive the data. The Keynesian beauty contest. That’s what makes this business so difficult. Stay tuned.
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