Hot Chinese ADRs in morning trading Wednesday rallied as investors bet Beijing will deploy more stimulus measures in the world’s second largest economy after China reported weak manufacturing data. Alibaba rose 1%; NIO rose 3%; PDD Holdings, XPeng and Li Auto rose 4%; Bilibili rose 5%.
Factory activity in mainland China contracted for the third straight month, with the official PMI manufacturing index released on Wednesday dropping to 49.4 from 49.5 in June. A reading below 50 indicates contraction in economic activity.
The non-manufacturing gauge fell to 50.2 from 50.5 from the previous month, missing the consensus estimate of 50.3.
The soft PMI readings point to a “further slowdown” in the second half, after the lower-than-expected growth in the second quarter, Nomura economists including Ting Lu said in a note on Wednesday. That could give Beijing more reasons to strengthen countercyclical policy action, they added.
“We expect more meaningful policy measures after September, when concerns over the growth slowdown may become more elevated,” they wrote.