Chinese equity markets reacted favorable to improving PMI reports from China – a sign that investors are finally hopeful a sustained recovery is underway?
The HSBC/Markit services purchasing managers’ index posted its strongest reading in seventeen months. Granted, the service sector has not been the major source of weakness for the Chinese economy. Nonetheless, investors liked it.
Indeed, the Chinese stock market has been showing signs of regained vigor of late, with both domestic and investable stocks breaking above key technical resistant levels that have been in place for years.
Chinese stocks, especially the domestic market, are notoriously volatile, driven by momentum chasing retail investors. But it is good news that the momentum is finally in a positive direction.
Overall, our China team continues to believe the risk-return profile of Chinese stocks is now positive due to a combination of depressed valuations and a strengthening growth and profit outlook.