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May 31, 2013
Flash: China MNI Business Indicator drops - Nomura
FXstreet.com (Barcelona) - Nomura economist Zhiwei Zhang notes that the China MNI business sentiment indicator dropped to 56.7 in May from 58.5 in April, which is lower than the flash estimate of 57.1, released on 24 May.
He sees that the new orders component dropped to 56.1 in May from 58.2 in April, and the production component slid to 54.2 from 57.3. This reinforces his view that the official PMI to be released on 1 June, will drop to 49 from 50.6 (Consensus: 50). Further, liquidity conditions have tightened recently in China. He writes, “The 7-day repo rate rose to an average of 4% since 17 May from a 3.2% average from January to 16 May. This is consistent with our macro view that credit growth likely peaked in Q1 and will drop in Q2 as the government tightens controls on shadow banking activities.” Additionally, he feels that other factors that may have contributed to the high repo rate include the SAFE tightening measures on capital flows, the tax payments due in May, and the seasonal month-end effect on liquidity.
He sees that the new orders component dropped to 56.1 in May from 58.2 in April, and the production component slid to 54.2 from 57.3. This reinforces his view that the official PMI to be released on 1 June, will drop to 49 from 50.6 (Consensus: 50). Further, liquidity conditions have tightened recently in China. He writes, “The 7-day repo rate rose to an average of 4% since 17 May from a 3.2% average from January to 16 May. This is consistent with our macro view that credit growth likely peaked in Q1 and will drop in Q2 as the government tightens controls on shadow banking activities.” Additionally, he feels that other factors that may have contributed to the high repo rate include the SAFE tightening measures on capital flows, the tax payments due in May, and the seasonal month-end effect on liquidity.