China's business surveys continue to show stabilization in economic activity. The ISI Group's seasonally adjusted MNI Survey index (see discussion) shows some recent improvement. The survey is fairly balanced, with 75% from manufacturing and 25% from services.
|Source: ISI Group|
MNI: - Business conditions continued to expand after the lows of mid-summer, when they dropped to levels not seen since the height of the global financial crisis in late 2008 and early 2009. Key sub-indicators softened but mostly remain a few points into expansionary territory, still vulnerable to any external or domestic setbacks. Expectations for the future continued to improve in December at a faster pace but for the most part they too have not recovered very far into expansion.Similarly the HSBC Manufacturing PMI (final measure from this morning) shows the bottoming out of manufacturing activity.
HSBC/Markit: - Output at manufacturing plants in China expanded in December, and for the second month in a row. Although the rate of expansion was modest, it was the fastest in 21 months. Total new orders also increased but at a faster pace than in November, the quickest since January 2011. Exactly 15% of panellists noted increased order volumes, a number of which attributed growth to increased client demand. Meanwhile, new export orders fell slightly following a modest increase in November. Just over 12% of firms reported lower new export orders in the latest survey period. Fewer export sales were linked to weak demand in Europe, Japan and the US.In response to these positive indicators, some of China's institutions and money managers continue to come into the equity market that was abandoned by the retail sector. The Shanghai Composite is up for the year after a 15%+ rally in December. Even in China the retail capitulation signaled the bottom (see this post on Nov 30th). It is important to note however that China's economic stabilization is still quite tenuous and heavily dependent on economic activity in the US (see discussion).
|Shanghai Composite (source: Yahoo Finance)|
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