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CHINA: Little Positive Spillover From PMI Beat, 2025 Growth Expectations Steady

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Reaction to the Caixin services PMI beat hasn't been positive across China assets. Yuan gains were mostly around the CNY fixing outcome, while onshore equities are up from session lows, sitting modestly in positive territory. Local bond yields are up a touch, but the 10yr remains sub 1.60%. 

  • The Caixin services PMI showed similar trends to the official PMIs. The services side comfortably beating expectations, up to 52.2, versus 51.4 forecast and 51.5 prior. The composite index still fell to 51.4 from 52.3, due to softness in manufacturing (50.5 from 51.5, which printed last Thursday).
  • The China Citi surprise index remains in positive territory, but off late Dec highs. Market growth expectations are steady for 2025, at 4.5% as per BBG consensus forecasts.
  • Thursday's inflation prints will be important, given the PBoC stated recently further policy adjustments are coming at an appropriate time (RRR and interest rate cuts). This should generally keep onshore bonds supported, although local media stated we could see more volatility this year (see this link).
  • For USD/CNH, the CNY fixing bias remains skewed against depreciation pressures. Whilst the pair has broken higher, the focus remains on controlling the pace of depreciation pressures. Bill issuance in Hong Kong is also expected to be stronger in January. Recent highs near 7.3700 may hold, but the market is still likely to buy dips in the pair, a firm theme since the US election in early Nov.  The 20-day EMA support zone is near 7.3100.
  • For local equities, the CSI 300 is testing levels last seen in Sep last year. The index has spent little time sub 3800 since this period last year. 
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Reaction to the Caixin services PMI beat hasn't been positive across China assets. Yuan gains were mostly around the CNY fixing outcome, while onshore equities are up from session lows, sitting modestly in positive territory. Local bond yields are up a touch, but the 10yr remains sub 1.60%. 

  • The Caixin services PMI showed similar trends to the official PMIs. The services side comfortably beating expectations, up to 52.2, versus 51.4 forecast and 51.5 prior. The composite index still fell to 51.4 from 52.3, due to softness in manufacturing (50.5 from 51.5, which printed last Thursday).
  • The China Citi surprise index remains in positive territory, but off late Dec highs. Market growth expectations are steady for 2025, at 4.5% as per BBG consensus forecasts.
  • Thursday's inflation prints will be important, given the PBoC stated recently further policy adjustments are coming at an appropriate time (RRR and interest rate cuts). This should generally keep onshore bonds supported, although local media stated we could see more volatility this year (see this link).
  • For USD/CNH, the CNY fixing bias remains skewed against depreciation pressures. Whilst the pair has broken higher, the focus remains on controlling the pace of depreciation pressures. Bill issuance in Hong Kong is also expected to be stronger in January. Recent highs near 7.3700 may hold, but the market is still likely to buy dips in the pair, a firm theme since the US election in early Nov.  The 20-day EMA support zone is near 7.3100.
  • For local equities, the CSI 300 is testing levels last seen in Sep last year. The index has spent little time sub 3800 since this period last year.