China Stocks Post Biggest Weekly Gain in a Month After PMI Data

  • Official PMI matches estimates as Caixin data misses forecasts
  • PBOC has room for targeted moves to release liquidity: JK Life

China's June PMI Data Shows L-Shaped Recovery

China’s stocks capped their biggest weekly gain in a month after official manufacturing data matched forecasts and a gauge of services activity perked up.

The Shanghai Composite Index posted a weekly advance of 2.7 percent as it added 0.1 percent on Friday. Materials companies rose while a measure of health-care companies fell. China’s manufacturing purchasing managers index for June stood at 50, the line dividing improvement from deterioration, and the non-manufacturing PMI gauge rose to 53.7 from 53.1 in May, data showed on Friday.

While China’s central bank has kept its main rates at a record low since October, leaving the onus on the government’s fiscal measures to underpin growth, some analysts say it has room for more measures. Asian stocks headed for their best week since April as investors bet central banks will limit the fallout from the U.K.’s vote last week to leave the European Union.

“China’s central bank may have ammunition, like targeted loosening moves, to release liquidity at a mild pace,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. “Investors believe global policy makers reserve contingency measures to deal with Brexit.”

The Shanghai Composite closed at 2,932.48, while the CSI 300 Index was little changed. The Shanghai gauge climbed 0.5 percent in June, posting its first monthly gain since March and offering some respite to a market that ranks among the world’s worst-performing over the past twelve months. Hong Kong’s stock market was shut for a holiday.

Expectations that a plunging euro and rising political uncertainty in Europe will hurt demand for Chinese products is boosting speculation the People’s Bank of China will take steps to ease monetary policy. Australia & New Zealand Banking Group Ltd., Standard Chartered Plc and Commerzbank AG all say the nation will probably lower banks’ reserve requirements as soon as July, while one-year interest-rate swaps, a gauge of rate expectations, fell the most last month since April 2015.

Caixin PMI

A private manufacturing index showed activity at the nation’s factories has yet to pick up. The PMI gauge fell to 48.6 in June, compared with an estimate of 49.2, the result of a separate survey by Caixin Media and Markit Economics showed on Friday.

China Resources Sanjiu Medical & Pharmaceutical Co. dropped the most in two weeks to pace declines for a measure of health-care shares. Shandong Gold Mining Co. jumped 4.9 percent to its highest close since October 2012 as gold prices headed for a fifth weekly gain.

Anhui Conch Cement Co., the nation’s biggest manufacturer of the building material, retreated 0.8 percent. The company’s plan to acquire West China Cement Ltd. fell apart, as conditions including government approval weren’t met by a June 30 deadline, the two companies said in a joint statement.

— With assistance by Shidong Zhang

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