Next Week in China: 30 September-4 October 2024

Major Data Releases:

• 30 September: Caixin to report China September Manufacturing Purchasing Managers’ Index (PMI)
• 30 September: National Bureau of Statistics of China to report September PMI
• 30 September: Macau to report August external merchandise trade data
• 3 October: Hong Kong to report August retail sales statistics
• 4 October: Hong Kong to report September Manufacturing PMI

Next week is the National Day Golden Week holiday in China beginning Tuesday, 1 October to Monday, 7 October. The market will be closed throughout this period to celebrate the founding anniversary of the People’s Republic of China.

Regarding the PMI, we observed a slowdown in domestic market demand and a continued divergence between global and internal demand in August. According to data from the Chinese government, the production index decreased from 50.1 in July to 49.8 in August, a month-on-month decline of 0.3 per cent to mark four straight months of a slowdown. The new orders index dropped by 0.4 per cent to 48.9, remaining below the boom-bust line for four consecutive months. However, new export orders showed a slight recovery to record a marginal increase from 48.5 to 48.7, although still below the neutral mark of 50.

Market players have been anticipating more proactive macroeconomic policies from the Chinese government since August. After an initial disappointment on interest rate adjustments the previous week, the People’s Bank of China (PBoC) announced a range of stimulus measures on 24 September. It reduced the 7-day reverse repurchase rate by 0.2 percentage points to 1.5 per cent, the reserve requirement ratio (RRR) by 0.5 percentage points, and existing mortgage rates by 0.5 percentage points. Additionally, the central bank said it may cut the RRR further by 0.25-0.5 percentage points before the end of the year, which will infuse additional liquidity in China’s banking system and make borrowing cheaper. Taken together, these seek to stoke economic activity in Mainland China to ensure that the 5 per cent growth target for 2024 may be achieved.

With the announcement of the stimulus, as of Thursday, September 26, the MSCI China Index had risen by 12.8 per cent, the Shanghai Composite Index had increased by 9.65 per cent, the Shenzhen Component Index had risen by 10.42 per cent, and the ChiNext Index had increased by 11.55 per cent week-on-week.

The average total trading volume for the stock market over the three days following the PBoC announcement was RMB 1.1 trillion, significantly higher than the RMB 552.9 billion recorded on Monday. 

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.