Restocking drives up HSBC China PMI – Nomura

FXStreet (Barcelona) - Research Analysts at Nomura, view that the above expectation boost in Chinese HSBC PMI was as a result of overstocking due to leverage from lower oil prices, and further share their forecast for PMI, GDP and monetary policy changes.

Key Quotes

“In our opinion, the rise in the HSBC flash PMI in February reflects more the restocking activity of firms than any real improvement in final domestic demand. The sustainability of this restocking remains in question.”

“…we still expect the official PMI to remain unchanged at 49.8 in February, in part because of the continued slide in the MNI business sentiment survey, suggesting no improvement in overall growth momentum.”

“We maintain our view that GDP growth will slow to 7.1% y-o-y in Q1 from 7.3% in Q4, given deep-rooted structural challenges such as local government debt, the property market correction and deleveraging.”

“We continue to expect policy to ease further, including a 25bp policy interest rate cut in Q2 and 50bp cuts to the banks’ reserve requirement ratio in each quarter through the rest of the year.”