HSBC China PMI Indicates 4th Month Of Contraction As Yuan Weakens To Fresh 16 Months Lows

Tyler Durden's picture

HSBC's (Flash) China Manufacturing PMI for April met expectations at 48.3 - holding at its 2nd lowest in 20 months. This is the 4 month of contraction and 4th month without a beat of expectations. April's flash (preliminary) print rose modestly over March's 48.0 but all sub-indices remain weak though some 2nd derivatives are shifting. Employment is worsening at a faster pace and new export orders contracted. While the world waits open-mouthed for the next Chinese stimulus (which they have now explained will be limited and targeted and not 2009-style) and bloviators expound on last night's RRR cut for rural banks (remember, they do not have a liquidity issue, banks are hording PBOC cash and not lending - due to credit risk concerns), it seems no matter what the PMI (weak, weaker, or weakest) the reforms are being stuck to, CNY is being allowed to weaken, and no new avalanche of credit creation (commodity-backed or not) is coming anytime soon.



Most market participants believe HSBC's survey is more weighted towards small and medium-sized businesses than the official government data (which is likely more biased to SOEs and larger enterprises) and Markit's stratification description suggests a more accurate representation of the overall economy - therefore HSBC better reflects the tightening liquidity conditions than China's official data.


Overall the sub-indices are weak with some hope for the ever optimistic that the pace of collapse is slowing



CNY has dropped to fresh 14-month lows against the USD... At 6.2423, USDCNY is back to pre-QE4EVA levels in Dec 2012 - 6.40 next target


Charts: Bloomberg and Markit Economics

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Soul Glow's picture

This will be bullish for US equity somehow.

Slave's picture

Okay, okay, okay. I'll sell my gold already, Christ.



Soul Glow's picture

That is their plan.  Stagnate the economy so savers are forced to spend.  Food, rent, transportation - the prices at the base of the economy have risen dramatically, yet unemployment (U-6) stays high.  Make the poor porrer while the rich continue to live like kings and queens.

knukles's picture

No no no no no no NO

Sumptin's wrong (Or Wong in this case, maybe?) with all the differring market reactions to the global gobbldiegook.
If China is slowing, it portends that they'll need to re-stimulate.
Same with Europe (which neither ever slowed or recovered, FFS, except for Greece and ... oh nevermind, its a mess has always been a mess) need to re-stimulate
And Yankee land ain't doin' so hot either.

So in the face of all the stimuli (like that?) equities go bananas... the liquidity effect, grant you.
(Not that I agree or like it because when it ends and it will at some point...)
But then if that's true from a macro sense, then TIPS ought to be rallying as should Gold.
And commodities.
But oh, no.
And long bonds are rallying while shorter stuffs getting throttlesd... bull flattener in the long end, bear flattener in the short... depends on your longer run outlook, don't it long bond shorts?.

Makes no sense.
The parts are not moving in any uniform thematic direction.
In spite of manipulaitons they should do so somwehat and there ain't no somewhat

And I'll bet that the ease is gonna not only continue but get even easire (No, I don't know how, si I'll not even try to expalin) because we're in a liquidity trap, FFS.


TruthInSunshine's picture

Shit's getting real in the financial (where USD billions in CNY denominated loans sour BY THE DAY) & real economy in China -

News Headline Summary

China MIIT official Feng Fei says steel industry situation severe

- China to strictly control new steel capacity

Update details:
- Last month a senior official from the China Iron and Steel Association said that the domestic steel sector may have FACED ITS WORST Q1 SINCE THE YEAR 2000, as the quarterly CISA index measuring steel prices fell to its lowest in 20 years.

i_call_you_my_base's picture

Manufacturing will "rotate" back to the US.

Tinky's picture

I'm rotating into high-end NYC co-ops.

knukles's picture

I want the 100th floor bubble penthouse.
The one where the elevators don't work when the electricity goes out and then you starve to death in comfort ... but at least collect the rain water ... to water the palm trees next to your private pool.

Can even throw red hot pennies off the balcony to the starving urchins for shits and grins and they can never ever get you!
Booyah, a Fucking Cramer Moment

Yen Cross's picture

    The Australian CPI missed also. The aud is taking it in the wazoo right now.

knukles's picture

See see see
That's what the fuck I'm talkin' about...
Now they're gonna "leave their money rate at 2.5% indefinitely"
Bullshit... China slowing...
Next stop is 2.25, then 2.0 then .... 

TheRideNeverEnds's picture

Yea i was watching that and wondering what was causing it then checked around and nothing else was really moving.    


that feel when I rotated out of short AUD last friday at a small profit and into short GBP. 


god dammit

TheRideNeverEnds's picture

e-minis sharply lower on the news: down a full tick. 

AdvancingTime's picture

Fast growth tends to mask flaws and weakness within a system, and China has been growing like a weed for years. To make things worse many of the investment decisions were driven by politics. This has created massive overcapacity. Money has been poorly allocated and often shoveled into deep holes like ghost cities and bridges to nowhere.

Currently a 6.6 trillion dollar spending spree used as stimulus to combat global economic slowdown is coming back to haunt China. This has greatly expanded credit and created huge overcapacity during the past five years. A massive debt crisis now looms in the offing. Companies are struggling to repay loan taken to build factories that sit idle because of weak demand. More in the article below,

SDShack's picture

How many trillions in US treasuries does China hold? Is China still the ONLY foreign nation with access to the Fed window? This tells me China doesn't have a liquidity problem... at least not if we are talking about fiat based credit/liquidity.

Elliptico's picture

HSBC - Ha, ha, ha, ha...  Maybe we shoud hear from Moody's next.  And isn't Madoff publishing data, too?

Rising Sun's picture

When HSBC isn't laundering drug lord cash to prop up their operation, they have time to create these PMI reports for China.


Good for HSBC.

yrbmegr's picture

"Contraction", in this context, means "growth" less than 6%.