China reported their preliminary manufacturing PMI for April yesterday (23 April) morning. The actual figure came in at 48.3, in line with the estimate from Bloomberg’s survey of 25 economists. However, the reading below 50.0 sparked a sell off in the HSI shortly after the data release.

The Manufacturing PMI is a measurement of the manufacturing activity in an economy. A PMI reading higher than 50 indicates expansion of the manufacturing sector while a reading under 50 indicates contraction.

HSI performance thus far
The HSI April futures slipped 1.2% yesterday in a single direction and closed near its intra-day low at 22,468 following the negative Chinese economic data.

The HSI has gained approximately 1.6% month-to-date on the back of improving economic conditions. Closing at 22,510 yesterday, the HSI is currently trading 0.8% above its 50-day moving average price of 22,327. The HK benchmark is currently trading at approximately 10.5x earnings, versus the 17.3x seen in the S&P 500 index in the US market.

The HSI traded at its year-to-date low of 21,137.61 on 20 March on the back of continuous disappointing economic data from China. The index rebound strongly the following day after the Chinese government eased their restriction on companies issuing preference shares. Its rebound continued for the next four weeks with the HSI gaining as much as 6.3% from its close on 20 March.

Source: Macquarie Research - 24 Apr 2014