SHANGHAI, Jan. 25 (SMM) - The HSBC announced Thursday that China’s preliminary manufacturing PMI for January was 51.9%, up 0.4 percentage point from December’s final reading. The data not only hit a two-year high, but also pointed to rebound for five months in a row. Base metal prices in China, however, failed to be immediately lifted. This is because many of the Chinese economic indicators released recently were positive, so the rally in PMI gave markets no surprise.
"Thanks to the continuous gains in new business, manufacturers accelerated production by additional hiring and more purchases," said Qu Hongbin, Chief Economist at HSBC. "Despite still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in coming months," he added. The new order sub-index was 52.7% in January against the 52.9% in December. The new export order sub-index was 50.1% in January, compared with the 49.2% in December. Generally speaking, orders rebounded mildly.
After the House of Representatives passed a plan to extend the debt ceiling deadline by an additional 3 months through voting on Wednesday, market focus has shifted back to fundamentals. LME aluminum fell back after hitting high, as a result, giving back gains seen during the US and European session. Markets chose to ignore the existing excess copper supply in china when positive news came out. For example, markets paid less attention to the IMF’s downgrade of its forecast for eurozone’s economic growth in 2013. During the World Economic Forum annual meeting held on January 23, the IMF expected economy in the euro zone to grow -0.2% in 2013, slightly up from the -0.3% forecast for the year 2012. Still, euro zone’s economy is continuing to shrink.
There are now only two weeks left before the Chinese New Year. SMM notes that ample liquidity and positive PMI will leave room for speculation ahead of the Chinese New Year, thereby making markets more volatile. SMM expects prices of the most active SHFE copper contracts to continue to meet resistance at RMB 59,000/mt.