"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 31 August: China to report August Manufacturing Purchasing Managers’ Index (PMI)
• 31 August: Hong Kong to report July retail sales statistics
• 1 September: RatingDog to report August Industrial PMI
• 3 September: RatingDog to report August Services PMI
• 3 September: Hong Kong to report Q2 2026 statistics on port cargo, container shipment volumes
• 4 September: Macau to report May-July residential property price index

The first week of September will be relatively quiet in terms of major economic data releases. Attention will centre on the August manufacturing PMI, which we expect to remain subdued, and on whether improving input prices can provide early signs of stabilisation in industrial pricing.

The Emerging Industries PMI (EPMI), a leading indicator for the official PMI, stood unchanged at 47.8 in August. It was slightly weaker than the usual seasonal pattern: between 2014 and 2025, the EPMI recorded an average increase of 1.1 points. The unchanged figure also masks divergent underlying trends, as product orders and production improved but employment and companies’ own inventories weakened. Export orders rose by 0.4 points, extending the modest recovery seen since June. Although the index remained well below its May level, the improvement suggests that overseas demand has not entered a sustained contraction.

Inventory behaviour remains more cautious. While customer inventories edged higher, companies’ own-inventory index fell sufficiently to subtract 0.2 points from the monthly EPMI figure. This indicates that firms remain reluctant to increase raw-material purchases, leaving procurement growth weaker than production. Own inventories in the new-energy, new-energy vehicle, and biotechnology industries declined by 6.0, 4.6 and 4.2 points, respectively. Adjustment for the first two sectors may reflect not only commodity-price volatility and geopolitical uncertainty but also the growing focus on curbing excessive competition. Price-compliance guidance for solar panels in late July and an anti-involution initiative in early August point to a shift towards greater supply discipline. This may improve industry economics over time, although the near-term effect is likely to be more cautious production and procurement decisions.

Purchase prices offer a more constructive signal: selling prices were unchanged in August, but the purchase price index rebounded by two points after three consecutive monthly declines. Firmer input costs create conditions for industrial prices to stabilize, but even so, these would not establish a broad recovery in final demand and could instead place additional pressure on margins if selling prices remain weak. Our subdued PMI view is also supported by slower growth in South Korea’s semiconductor and overall exports compared to their June peaks, generally soft operating rates in traditional industries, and weather-related disruptions. Above-normal temperatures and widespread rainfall across Jiangsu, Zhejiang, and Shanghai weighed on construction activity and contributed to a sharp fall in concrete demand during early August.

China equities delivered mixed performance over the past week. As of Thursday, 27 August, the MSCI China Index was down 1.24 per cent, while the Shanghai Composite gained 1.32 per cent. The Shenzhen Component slipped 0.32 per cent and the ChiNext fell 2.04 per cent. Small caps slightly outperformed their mid- and large-cap peers, while value shares continued to outpace growth.

Despite continued volatility in technology shares, confidence in technology investment appears to have strengthened since the beginning of August. The broad-based, valuation-led rally of the first half is giving way to a more selective market driven by earnings delivery. Companies with visible orders, deployable capacity, and demonstrable profits should be better placed to sustain gains, while stocks supported primarily by thematic narratives are likely to be repriced. Technology rallies typically progress from technological catalysts to order validation, supply constraints and, ultimately, confirmation of genuine demand. Market leadership should narrow as this advances, but the quality and durability of returns may improve. Equity allocation should, therefore, favour businesses capable of converting technological innovation into orders, revenue, cash collection, and reinvestment.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.

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