April 2, 2014 6:04 am JST

Hopes lifting Shanghai stocks for now


HONG KONG -- A slim improvement in China's official purchasing managers' index for manufacturers was enough to break a streak of down days for Shanghai shares.

     The Shanghai Composite Index closed higher Tuesday on the news that the manufacturing PMI rose in March to 50.3 from 50.2 in February, its first gain in four months. Investors took this as a go sign amid months of flashing yellow lights over China's economy.

     The manufacturing report contained little to rejoice about. About the only notable bit was a jump in new export orders. A competing index put out by HSBC was revised downward slightly from its preliminary March reading. Concerns about the economy have not faded completely.

     Even so, Shanghai stocks have been rebounding, albeit modestly, since slipping to a near-term low on March 20. Haitong International Securities calls this trend "strong."

     Investors see cause for hope for supportive measures by the government. Last month, the government approved capital increases by listed real estate companies for the first time in three and a half years, and partly lifted a ban on preferred-stock issuance. Premier Li Keqiang declared that Beijing stood ready to take action to keep economic growth within an appropriate range. Some take that as a hint that new stimulus isn't out of the question.

     Tuesday's official PMI data provided a sign of improvement in the real economy to go with the rising expectations of policy support. Many are predicting somewhat better macroeconomic indicators for March, due out later this month. While plenty could still roil the market, "the worst is over for now," concludes ANZ.