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26 Apr 2016
China to remain constructive - Westpac
Richard Franulovich, analyst at Westpac explained that there have been six Caixin PMI recovery cycles in China since 2008, including the current uptick.
Key Quotes:
"Each of these recovery cycles appears to have been a function of policy, where attempts to stabilise growth crystalise a recovery that lasts for a few months only to be followed by a stall as policy support ebbs.
"When these recovery cycles are overlaid upon each other we find that they all share very similar dynamics – each “mini upcycle” tends to last about 5 months and they tend to see the PMI rise on average about 5pts."
"On these historical metrics the rise in China’s PMI has further to run, probably through to July-August, before it stalls and the cycle breaks the other way. Just as noteworthy though, a weaker set of PMIs for April would be nothing less than devastating, given the aforementioned and given that the stimulus applied ahead of this upswing has been that much larger."
Key Quotes:
"Each of these recovery cycles appears to have been a function of policy, where attempts to stabilise growth crystalise a recovery that lasts for a few months only to be followed by a stall as policy support ebbs.
"When these recovery cycles are overlaid upon each other we find that they all share very similar dynamics – each “mini upcycle” tends to last about 5 months and they tend to see the PMI rise on average about 5pts."
"On these historical metrics the rise in China’s PMI has further to run, probably through to July-August, before it stalls and the cycle breaks the other way. Just as noteworthy though, a weaker set of PMIs for April would be nothing less than devastating, given the aforementioned and given that the stimulus applied ahead of this upswing has been that much larger."