CHI 50 – Weekly Chart
The CHI50 index appears to be tracking global stocks lower with the support at 12,390-13,00 now crucial for the uptrend.
The March Caixin Manufacturing purchasing managers’ index came in at 51.2 versus expectations of 50.6 and February’s 50.8. This is after Monday’s “official” survey also indicated stronger-than-expected growth in manufacturing in March.
US markets normally move on Chinese economic strength, but tariffs are having an effect on the outlook. Thursday now brings data from the services sector of the economy with a 51.6 reading expected.
The Chinese economy faces uncertain times as a huge 20% of its GDP is exports, and a trade shock will have a major impact. Factories are looking for new customers to sell their products, avoiding the US, but that could be hard with consumerism not booming overseas.
The latest PMI data is a sign of an improving Chinese economy, boosted by the government’s stimulus, but that will now be hurt by the tariffs implemented. Any gains in China’s stock market recently have been driven by tech and not supporting other emerging markets.
China’s outperformance is “driven by a specific tech-driven boost to spending more towards the consumer away from investment, and it’s very unlikely to have large spillover impact to the rest of EM,” said Manik Narain, head of emerging-markets research at UBS Group in London. “This is not the classical Chinese playbook of 2009, 2016, 2020 that ultimately morphed into broader EM recoveries”.
Bright spots have recently emerged in the economy but Trump’s trade wars risk hurting the recent gains.
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