PMI data helps sentiment on Chinese equity markets

China's Purchasing Managers Indices (PMI) improved in February, contributing to gains on domestic equity markets.

The Indices represent the views of more than 700 local purchasing and supply manufacturers on levels of production, new orders, deliveries from suppliers, inventory and employment. According to data compiled by the China Federation of Logistics and Purchasing, the Manufacturing Index rose from 45.3 to 49 over the month, while the PMI New Orders Index gained over five points to 50.4. This means that the rate of contraction in manufacturing is slowing. However a reading under 50 still represents a fall.

"This is a relatively new data series", says Charlie Awdry, Manager of Gartmore's China Opportunities Fund. "We're cautious about extrapolating from these results, particularly in a month affected by Chinese New Year, but it's striking that the purchasing, new orders, output and export elements all improved in February. The improvement in the PMI could show the early positive impetus of the government's fiscal stimulus package. Chinese banks are lending too, and interest rates have been cut five times since September last year."