PBoC Holds LPR, Equities Dip

Market Snapshot

Asset	Level	Change
Shanghai Composite	4,152.30	-0.72%
CSI 300	4,694.41	-0.72%
Hang Seng	25,768.08	-1.12%
TAIEX	34,323.65	-2.20%
USD/CNY	6.90	+0.60%
USD/HKD	7.80	-0.23%
Copper	5.83	-1.05%
Brent Crude	81.87	+5.31%
Gold	5,099.50	-3.68%
Bitcoin	68,313.27	-0.67%
China 2Y Govt Yield	-	-
China 10Y Govt Yield	-	-

Prior Economic Events

Data	Prior	Cons	Actual
No events available

Today's Economic Events

Data	Prior	Cons	Time
NBS Manufacturing PMI	49.30	49.10	15:30
NBS Non-Manufacturing PMI	49.40	49.80	15:30
RatingDog Manufacturing PMI	50.30	50.20	15:45
RatingDog Services PMI	52.30	52.30	15:45

PBoC keeps benchmark lending rates steady, signaling tolerance for yuan strength amid economic slowdown.
Greater China equities decline on global tech weakness, with Taiwan's TAIEX hit hardest by semiconductor concerns.
Key PMIs from NBS and RatingDog due today, highlighting mainland manufacturing and services sentiment.

Yesterday's Recap

Greater China equities closed lower on March 2, with mainland China's Shanghai Composite falling 0.72% to 4,152.30 and the CSI 300 dropping 0.72% to 4,694.41, pressured by global risk-off sentiment and commodity volatility. Hong Kong's Hang Seng index declined 1.12% to 25,768.08, reflecting concerns over property sector woes and rising HIBOR rates tied to the USD/HKD peg. Taiwan's TAIEX plunged 2.20% to 34,323.65, driven by semiconductor supply chain disruptions amid US export controls and AI boom uncertainties.

The USD/CNY strengthened 0.60% to 6.90, aligning with PBoC's guidance for yuan appreciation tolerance despite economic slowdown signals. Copper prices, a key proxy for China growth, slipped 1.05% to 5.83, underscoring demand worries, while Brent crude surged 5.31% to 81.87 on geopolitical tensions. Gold fell 3.68% to 5,099.50, and Bitcoin dipped 0.67% to 68,313.27.

No major data releases occurred, but news of China's Lunar New Year travel rush estimating 9.5 billion trips boosted consumer sentiment expectations for mainland China. Cross-strait dynamics featured Taiwan's foreign minister warning that Taiwan will not escalate but will not yield to Chinese intimidation, impacting investor confidence in Taiwan's tech-heavy economy.

The Day Ahead

Mainland China's NBS Manufacturing PMI is due at 15:30 ET, with consensus at 49.1 versus previous 49.3, potentially signaling continued contraction below 50 amid factory slowdowns. The NBS Non-Manufacturing PMI follows at the same time, expected at 49.8 from 49.4, offering insights into services recovery post-Lunar New Year. RatingDog Manufacturing PMI releases at 15:45 ET, forecasted at 50.2 from 50.3, which could highlight private sector resilience in export-oriented industries.

RatingDog Services PMI is also slated for 15:45 ET, holding steady at consensus 52.3, reflecting potential strength in tech and consumer services. These indicators will dominate focus, influencing PBoC policy outlooks and yuan dynamics. No major events are scheduled for Hong Kong or Taiwan, though ongoing geopolitical tensions may amplify market reactions to the data.

Other Economic Notes

Mainland China's economy faces balancing acts, with recent CPI YoY at -0.10% as of April 2025 indicating deflationary pressures that could prompt further stimulus, especially in property and rare earths sectors as highlighted by Premier Li. (cont...)

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Other Economic Notes (continued)

Hong Kong advances AI and blockchain initiatives, including a cross-border cargo platform with Shanghai to streamline trade finance via blockchain for cargo data and electronic bills of lading, amid efforts to position as a talent and innovation hub per Budget 2026 priorities like tourism revival and AI-driven innovation. Taiwan benefits from US investor inflows into equities driven by the AI boom, with record outlays tying the market to global semiconductor demand despite risks from cross-strait tensions. Broader themes include China's anti-corruption drive intensifying ahead of the 'two sessions,' potentially stabilizing governance but adding regulatory uncertainty for investors.

Additional notes feature Hong Kong's warmest winter on record at 19.3 degrees Celsius average, and Chinese AI firm XtalPi expecting its first annual profit on 193% revenue jump from drug research.

Global Macro News

China's central bank left benchmark lending rates unchanged, signaling tolerance for a stronger yuan while supporting the slowing economy. Xi's Beijing inspection and the Taiwan Affairs Work Conference emphasized adhering to the one-China principle and the 1992 Consensus to unite Taiwan compatriots. Hong Kong's white paper and related developments include a court convicting a British woman of blackmail over a false rape claim, and police arresting a 14-year-old boy for animal cruelty involving cat abuse videos.

The government stated a golf course flats study has no legal effect in an appeal. China's AI red-packet battle during New Year saw firms like Alibaba, Baidu, ByteDance, and Tencent spend an estimated 8 billion yuan, raising questions on user retention. The US has ceded robotics economy leadership to China, as highlighted in festive broadcasts.

Hong Kong links with Shanghai for blockchain-based cargo data to cut trade finance costs. Pro-democracy activist Anna Kwok noted her father's jailing for national security offenses aims to silence her. Hong Kong's convention centre plans more medical, tech, finance, and education events.

Global AI dynamics boost Taiwan, with 90% of advanced semiconductors at risk from China tensions, per modeling of potential US-China war over Taiwan.

Greater China Central Banks Watch

The PBoC kept benchmark lending rates unchanged, signaling tolerance for a stronger yuan to manage economic slowdown while avoiding excessive depreciation, with focus on liquidity operations amid no recent MLF or LPR adjustments. State Council signals emphasize support for rare earths and property, potentially paving the way for RRR cuts if upcoming PMIs disappoint. HKMA maintains the USD/HKD peg at 7.80, with a 0.23% daily change reflecting stable aggregate balance and no interventions, bolstered by blockchain linkages with mainland trade authorities to enhance financial efficiency.

(cont...)

Continuation

Greater China Central Banks Watch (continued)

Taiwan's CBC monitors FX interventions closely amid TAIEX volatility, linking policy to semiconductor export outlooks as US inflows drive AI-related growth. No rate decisions were announced across the three, but geopolitical developments, including Taiwan Affairs Work Conference emphasis on the 1992 Consensus, could influence CBC's stance on currency stability. PBoC's report underscores balanced growth priorities, aligning with broader tolerance for yuan appreciation to curb capital outflows.

Hong Kong grants stablecoin sandbox access, shifting digital asset regulation eastward amid Bitcoin's presale hype.

Greater China Macro Daily(Beta Mode)