China: Manufacturing remains in contraction territory - TDS

Analysts at TD Securities point out that China’s official Jan manufacturing PMI came in at 49.5 (TD 49.5, consensus 49.3) as the manufacturing remains in contraction territory, weighed down by slowing global growth.

Key Quotes

“Trade concerns continue to act as a drag on manufacturing confidence, especially for private and smaller companies. Although a possible trade deal of sorts this week may help to reduce such concerns, the global backdrop is worsening and in particular the tech sector outlook.”

“In response, China will likely continue to implement targeted easing via more RRR and MLF cuts, aimed towards smaller companies.”

“Separately, the non-manufacturing PMI came in at 54.7, a stronger than expected reading (consensus 53.8) highlighting the growing disparity between manufacturing and services. CNY reaction was limited and as we have noted, China will likely maintain firm fixings around trade talks.”