SHANGHAI, Oct. 24 (SMM) - With the stimulus of financial policies and liquidities, China's manufacturing recovered, helping ease investors concerns that economy will continue to slide and allowing base metals prices to stop falling.
HSBC's October PMI for China was 49.1, reaching a three-month high. The rising PMI may help ease concerns that China's economy will slow further. That shows China's economy bottomed out, and will positively affect metal demand. China's improving manufacturing will increase global commodity demand, easing risk appetite caused by concerns over Spain's and Greece's debt problems.
Market funds also improved. According to China's central bank, funds outstanding for foreign exchange grew in September after posting negative growth in July and August. As China's economy stabilized, foreign exchange rate of the yuan against the US dollar continued to rise in September, causing large amounts of oversea capital to flow to China. In the meantime, trade surplus in September rebounded significantly. As a result, funds outstanding for foreign exchange grew in September, causing market liquidity to improve somewhat, and helping ease cash flow shortfalls.
The market did not expect additional measures from the monetary policy meeting of the US Federal Reserve taking place during October 23-24. At the monetary policy meeting in September, the Fed pushed QE3, and decided to buy USD 40 billion of collateral loan each month to support securities, so as to lower long-term interest rates and stimulate enterprise investments. Although US economy improved recently, the Fed will not change its policies at the meeting taking place this week.
The market is expecting monetary policies directions decided by the Fed tomorrow morning. On the other hand, China's improving manufacturing will help ease concerns over sluggish consumption, allowing base metals prices to stabilize.