Market Overview

China PMI Posts 19-month High in December

HSBC Holding Plc and Markit Economics announced that China's Purchasing Managers' Index (PMI) rose to 51.5 in December from 50.5 from the month prior.

The month's final manufacturing PMI increased for the fourth month in a row to a 19-month high because of an increase in business flows that have remained steady and the conclusion of destocking. Other median forecasts by various outlets, such as government-backed data or Bloomberg News, also found similar above-50 figures.

Although the rate of expansion was timid, the industrial output expanded as well in December for the second straight month to a 21-month high. The report also indicated a rise in purchasing activity at the fastest rate since March.

Economists at HSBC noted in their statement that such expansion will remain the same in the coming months because infrastructure construction will continue to post strong numbers and China's housing market will stabalize.

“This – plus Beijing's reiteration of keeping pro-growth policy in place into the coming year - should support a modest growth recovery of around 8.6 percent year on year in 2013 despite the ongoing external headwinds,” wrote Qu Hongbin, HSBC's chief economist for China, in a statement.

The Chinese PMI, a snapshot tracking function of operation conditions in the manufacturing sector, consists of two crucial figures: Above 50 means expansion and below 50 means contraction.

Despite the strong numbers, financial experts insist that the global markets are still concerned over the pending fiscal cliff in the United States. One strategist told Bloomberg News that the latest data is ameliorating, but nothing will be defined as positive until a deal is met in Washington.

The Hang Seng Index (HSI) didn't change much as it fell 0.4 percent at one point and rose as high as 0.1 percent. It closed at 22,656.92 at the noon closing time for the year. Meanwhile, the Shanghai Composite Index (SCI) of stocks advanced 1.6 percent on the final trading session of the year.

Most Hong Kong stocks did make gains, though, in the Monday trading session as for every nine stocks that saw gains seven stocks declined.

Citic Pacific Ltd. (HKG: HK 267), a miner of iron ore, a producer of steel and seller of cars, saw a 2.5 percent increase. SAIC Motor Corp. (SHA: 600104), the country's largest carmaker, jumped 3.16 percent and led industrial companies higher following the PMI release. Meanwhile, Techtronic Industries Co. (HKG: HK 669), a creator of power tools, dropped 1.6 percent.

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