Disappointing factory activity from China reinforced views that the Chinese government will launch fresh stimulus soon in order to stimulate the world’s second-largest economy back to growth.
On Monday, the HSBC/Markit Purchasing Managers’ Index (PMI) showed factory activity in China contracted at its fastest rate in a year in April as demand faltered and deflationary pressures persisted.
“The PMI indicates that more stimulus measures may be required to ensure the economy doesn’t slow from the 7 percent annual growth rate seen in Q1,” said Annabel Fiddes, an economist at Markit.
“Valuations are still attractive and this is a liquidity-fueled rally so any broad pullbacks are going to be viewed as a buying opportunity by investors,” said Grace Tam, a markets strategist at JP Morgan Asset Management in Hong Kong.
Equity markets in Shanghai fell after the PMI survey but quickly clawed back losses and were up nearly 1 percent by late morning as investors bet on more policy easing. China trade data is due out on Friday.
The Australian dollar fell after the data since China is Australia’s major trading partner.
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