A surprise (to some) drop in China's PMI was just enough bad news to prompt the good-news-seeking BTFD'ers into expectations of additional stimulus from China. Despite 'PBOC advisors' (implictly the mouthpiece of official policy strawmen) stating openly not to expect stimulus and confirming that China will see a "crisis" in local-government financing "but not as expolosive as the 2008 crisis", and that "China must face the moral hazrd issue", investors are buying CNY, copper, Chinese stocks, and practically everything else on the back of hopes for moar money. However, as Bloomberg's Tom Orlik [5] explains, with the government facing conflicting pressures an abrupt about-face in policy is unlikely.
Despite slowing growth implications,
[6]
Hoping for a stimulus is a mistaken strategy...
From "risking a sharper correction down the road" if they go back on the reform plan now; to prefering to re-acnhor rates higher and pushing for more fine-tuning than broad-based RRR cuts, Bloomberg Briefs' Tom Orlik explains in more detail here [5].
Lastly, as Orlik adds, in the details of the PMI release, deteriorating output and new orders paint a bleak picture of domestic demand. Rebounding export orders suggest February’s pronounced drop might overstate the weakness of foreign sales. Employment showed signs of stabilizing. Labor markets are a primary focus for China’s policy makers, and that’s another reason to think a wholesale shift to stimulus may not be in the cards.
But apart from that... we must buy because the Central Banks have taught us that is the right thing to do...