PMIs Mixed, Stocks Advance

Market Snapshot

Asset	Level	Change
Shanghai Composite	4,116.58	+0.84%
CSI 300	4,657.46	+1.19%
Hang Seng	25,321.34	+0.28%
TAIEX	33,672.94	+2.57%
USD/CNY	6.89	-0.13%
USD/HKD	7.82	+0.17%
Copper	5.83	-0.48%
Brent Crude	84.07	+3.28%
Gold	5,093.30	-0.53%
Bitcoin	71,309.30	-1.93%
China 2Y Govt Yield	-	-
China 10Y Govt Yield	-	-

Prior Economic Events

Data	Prior	Cons	Actual
NBS Manufacturing PMI	49.30	49.10	49
NBS Non-Manufacturing PMI	49.40	49.80	49.50
RatingDog Manufacturing PMI	50.30	50.20	52.10
RatingDog Services PMI	52.30	52.30	56.70

Today's Economic Events

Data	Prior	Cons	Time
No events available

China's official PMIs disappointed with manufacturing at 49.0 and non-manufacturing at 49.5, but Caixin surveys surprised positively at 52.1 for manufacturing and 56.7 for services, signaling uneven recovery in mainland activity.
Greater China equities rose, led by Taiwan's TAIEX up 2.57% on tech strength, with Shanghai Composite gaining 0.84%, CSI 300 up 1.19%, and Hang Seng edging 0.28% higher amid stimulus hopes.
Policymakers set a 2026 GDP target of 4.5-5.0% and announced $44 billion injection into state banks for tech financing, underscoring pragmatic growth and innovation focus.

Yesterday's Recap

Mainland China's official NBS Manufacturing PMI for February slipped to 49.0, below the consensus of 49.1 and previous 49.3, indicating continued contraction in factory activity amid weak demand, while the Non-Manufacturing PMI came in at 49.5, missing expectations of 49.8 from previous 49.4, reflecting subdued services momentum. In contrast, the Caixin Manufacturing PMI surprised to the upside at 52.1, beating forecasts of 50.2 and the previous 50.3, driven by stronger new orders and output, with the Services PMI surging to 56.7 against consensus and prior of 52.3, highlighting robust private sector expansion. Shanghai Composite closed at 4,116.58, up 0.84% on optimism over potential fiscal measures, while CSI 300 rose 1.19% to 4,657.46, buoyed by consumer and tech shares.

Hong Kong's Hang Seng advanced 0.28% to 25,321.34, supported by property gains despite global volatility, though trading volumes remained light. Taiwan's TAIEX jumped 2.57% to 33,672.94, propelled by semiconductor heavyweights amid positive export outlooks and supply chain resilience. Currency moves were modest, with USD/CNY easing 0.13% to 6.89 as the PBOC set a stable midpoint, and USD/HKD ticking up 0.17% to 7.82 within the peg range.

Copper, a key China proxy, dipped 0.48% to 5.83, tempering growth signals, while Brent crude rallied 3.28% to 84.07 on supply concerns.

The Day Ahead

With no major data releases scheduled for today in Greater China, markets will focus on digesting yesterday's PMI figures and monitoring any follow-up signals from the ongoing Two Sessions in Beijing, where further policy details on growth and tech support could emerge. Hong Kong may see attention on local developments, including education sector updates and potential biotech listing reforms, as venture capitalists call for eased rules to boost capital flows. Taiwan's semiconductor outlook remains in view amid global tech volatility, with any cross-strait trade news potentially influencing TAIEX sentiment.

Broader events include tracking yuan dynamics against a strengthening dollar, especially if Mideast tensions escalate and impact commodity prices like oil. Investors should watch for any unscheduled PBOC liquidity operations that could stabilize markets. (cont...)

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The Day Ahead (continued)

Overall, the quiet calendar shifts emphasis to geopolitical risks and global macro spillovers affecting Greater China assets.

Other Economic Notes

China's announcement of a 4.5-5.0% GDP growth target for 2026 reflects a pragmatic stance amid property sector challenges and external headwinds, with TD Securities forecasting 4.0% expansion, emphasizing quality over speed. The $44 billion injection into state banks aims to enhance tech financing, building on last year's $72 billion recapitalization to mitigate systemic risks and support innovation-driven growth. Broader themes include FX stability, as the yuan hovers near one-month lows due to Mideast conflicts and dollar strength, though corporate demand limits further depreciation.

Hong Kong's push as an education and biotech hub underscores efforts to integrate with the Greater Bay Area, potentially attracting cross-border investment. Taiwan's economy benefits from semiconductor demand, but geopolitical tensions could disrupt trade flows.

Global Macro News

Global markets are navigating heightened Mideast tensions, with widening conflicts pressuring the yuan and boosting oil prices, as Brent surged amid supply fears, indirectly supporting China's import costs but challenging inflation dynamics. The UK's deployment of more fighter jets to the Middle East adds to geopolitical risks, potentially elevating safe-haven demand for gold, which dipped slightly but remains a hedge for Greater China investors amid uncertainty. In AI and biotech, deals like Insilico Medicine's UAE partnership signal Middle East diversification, which could influence Hong Kong's role in global innovation flows.

Broader economic challenges loom, with China's defense budget rising 7% steadily, underscoring regional security priorities. Crypto markets, including Bitcoin's decline, reflect risk-off sentiment that spills into Taiwan's tech-heavy indices. Overall, these factors create a complex global backdrop, prompting China's Two Sessions to emphasize resilience and high-quality growth transitions.

Greater China Central Banks Watch

The People's Bank of China (PBOC) maintained a stable USD/CNY reference rate at around 6.9124, signaling a calculated shift to curb depreciation amid dollar strength and Mideast risks, with no immediate MLF or LPR adjustments noted but liquidity operations likely to support the $44 billion bank injection. State Council signals from the Two Sessions emphasize FX stability and pragmatic monetary easing to achieve the 4.5-5.0% growth target, potentially paving the way for future RRR cuts if deflation persists, as evidenced by the latest CPI YoY at -0.10%. Hong Kong Monetary Authority (HKMA) kept the USD/HKD peg intact at 7.82, with aggregate balance dynamics stable and no interventions reported, though rising HIBOR could reflect tightening liquidity tied to US rate paths.

(cont...)

Continuation

Greater China Central Banks Watch (continued)

Taiwan's Central Bank of the Republic of China (CBC) focuses on FX intervention to manage TWD volatility, linked closely to semiconductor export outlooks, with no rate decisions imminent but vigilance on cross-strait tensions. Across Greater China, central banks prioritize stability over aggressive moves, with PBOC leading on mainland recovery support. Commerzbank analysis highlights critical CNY policy targets from the Two Sessions, suggesting measured easing ahead.

Greater China Macro Daily(Beta Mode)