Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

China's Economy Recovers as Stock Markets Turn Bullish

Economics / China Economy Mar 05, 2009 - 05:30 AM GMT

By: Prieur_du_Plessis

Economics Best Financial Markets Analysis ArticleChina's manufacturing Purchasing Managers' Index (PMI) strengthened for a third consecutive month in February, climbing to 49.0% from 45.3% the previous month. Li & Fung Research Centre reports that there were some encouraging signs: all sub-indices were higher than their respective levels in the previous month though many were still lower than the critical level of 50% (i.e. still contracting).


In particular, both the Output Index and the New Orders Index rebounded to the expansionary zone of higher than 50% for the first time since September last year. In addition, the New Export Orders Index grew strongly by 9.7 percentage points to 43.4% in February, compared to the previous month.

The improved PMI numbers, together with the government's additional stimulus package, probably mark a trough in the GDP growth cycle. Andrew Pyle of ScotiaMcLeod, as reported by CEP News said: “Estimates for the country's growth outlook in 2009 have also started to levitate from the alarming 5-6% suggestions earlier this year back to 8%. Not as lofty as what we have been used to, but firm enough to put a floor under commodity prices …”

Some of the recent headlines from China Economic Net give an indication of the Beijing's strong emphasis on boosting growth.

NDRC: Further shut down backward production facilities   [03-05-2009]
NDRC: China's outbound investment up 13.2%   [03-05-2009]
China to further reform power pricing system   [03-05-2009]
China to put more funds to support SMEs   [03-05-2009]
China aims for 20% growth in fixed asset investment in 09   [03-05-2009]
China to invest 716.1b yuan in agriculture   [03-05-2009]
China aims 1.58% of 2009 GDP in research and development   [03-05-2009]
China stresses domestic demand in stimulating growth   [03-05-2009]
China aims for 17% growth in money supply in 09   [03-05-2009]
China pledges 42b yuan employment support   [03-05-2009]
China pledges hefty investment to boost agriculture   [03-05-2009]
China budgets record-high fiscal deficit   [03-05-2009]
Wen urges efforts to promote export   [03-05-2009]
China to continue active fiscal policy for growth   [03-05-2009]
New body planned to run underperforming SOEs   [03-05-2009]
Official: Spend more to boost economy   [03-05-2009]

Let's focus on a few graphs in order to gain a better understanding of China's economic situation.

First up is the relationship between China's PMI for new orders and the Baltic Dry Index - measuring freight rates of iron ore and bulk goods - showing both indices turning up from last year's lows.

china-1.jpg

Source: Plexus Asset Management (based on data from I-Net Bridge)

Next, China's PMI for stocks of major inputs shows the deterioration has probably bottomed and, based on the close relationship with the Metals Index, should put a floor under commodity prices.

china-2.jpg

Source: Plexus Asset Management (based on data from I-Net Bridge)

china-3.jpg

Source: Plexus Asset Management (based on data from I-Net Bridge)

And finally, China's improving PMI seems to indicate that the country might have seen the worst of the GDP growth statistics. (The Hong Kong PMI is used as a proxy of the Chinese PMI prior to 2004.)

china-4.jpg

Source: Plexus Asset Management (based on data from I-Net Bridge)

The Chinese Shanghai Composite Index is still down 63.9% from its high of October 2007, but has recovered strongly since its November 4 low (+27.8%) and is also the top performer for the year to date (+20.7%). As mentioned before, the chart pattern of the Index shows arguably one of the most bullish formations of the major stock market indices (see graph below).

The chart (top section) shows a pattern of rising lows, supported by the four-month trend line and the 50-day moving average, with the 200-day moving average within sight. Also, Chinese stocks have outperformed the Dow Jones World Index by 87% over the past six months (see rising relative price-performance line in bottom section of chart) and the S&P 500 Index by a similar magnitude (not shown).

china-5.jpg

The Chinese believe good and bad follow each other closely. It is therefore also comforting to learn that the Year of the Ox is a sign of prosperity and has been very rewarding in the history of China. Will China's command economy come to the Western world's rescue? Time will tell, but there are rays of light, not least of which is a bullish-looking Chinese stock market.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

By Dr Prieur du Plessis

Dr Prieur du Plessis is an investment professional with 25 years' experience in investment research and portfolio management.

More than 1200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns (including his blog, Investment Postcards from Cape Town : www.investmentpostcards.com ). He has also published a book, Financial Basics: Investment.

Prieur is chairman and principal shareholder of South African-based Plexus Asset Management , which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries.

Plexus is the South African partner of John Mauldin , Dallas-based author of the popular Thoughts from the Frontline newsletter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental Index™ methodology in the Pan-African area.

Prieur is 53 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town , South Africa . His leisure activities include long-distance running, traveling, reading and motor-cycling.

Copyright © 2009 by Prieur du Plessis - All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Prieur du Plessis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules