More News on China’s Recovery
The week began on Monday when Andy Rothman, the China Macro Strategist for CLSA Asia-Pacific Markets, presented some positive news on the country’s economy in an interview with CNBC’s Oriel Morrison. Though Andy has been consistently optimistic on China’s reaction to the crisis, he admitted to being somewhat surprised as to how quickly and strongly the country’s economy is recovering.
In the interview, Andy reported that the CLSA China PMI (Purchasing Manager Index) rose sharply in April, breaking into expansion territory for the first time since July 2008 and supporting his view that the manufacturing sector has begun a sustainable recovery. Andy further stated that the manufacturing PMI hit 50.1 last month, up from 44.8 in March and a bottom of 40.9 last November. The month on month increase was the largest in the PMI’s five-year history.
Andy also said that one of the most striking results of the April survey is that Chinese manufacturers raised their staffing levels for the first time in nine months, signalling their belief that better times are ahead. He noted that rising job creation should improve consumer sentiment, which in turn should support the current rise in home sales and boost retail sales growth.
Coincidentally, I had dinner that same evening with several CLSA representatives who were hosting a group of institutional clients from the United States and Australia. Though it was only their first day in China, I asked what they had learned so far. They said that they were very surprised to learn that housing starts had increased to 7 million from only 2.5 million at the start of the year. This further supports Andy’s contention that consumer sentiment in China has turned positive, and the property market, one of the largest drivers of China’s economy, is rebounding.
Autos, another important sector, delivered some more good news. According to preliminary car sales data for April, unit sales for the top 25 car assemblers were up 23.6 percent year on year, compared to the 2 percent rate of growth registered in the first quarter. Demand was particularly strong from inland China. More on that later when the final numbers come out.
The Shanghai Composite Index closed at 2,592 today, up 42 percent from the beginning of the year. No wonder!