Strong PMI reports support Chinese stock markets

Chinese ADRs rose in premarket trading on Wednesday after two key business surveys in China showed activity in the world’s second-largest economy surged following the end of COVID-19-related lockdowns.

Both the official manufacturing purchasing managers’ index, which tracks mostly large state-owned enterprises, and the Caixin PMI, which tracks smaller private sector manufacturers, rose more than expected to levels indicative of strong growth.

The official PMI rose to 52.6, the highest level in the last decade, while the Caixin PMI rose to 51.6 from 49.2 in January. The official non-manufacturing PMI rose further, reaching 56.3.

Alibaba (NYSE:BABA) ADRs were up 5.5%, Baidu (NASDAQ:BIDU) ADRs were up 6.2% and (NASDAQ:JD) ADRs were up 4.7%.

Meanwhile in Hong Kong, home to some of China’s largest construction and technology stocks, the benchmark Hang Seng index rose 4.2%, its biggest daily gain since early January.

But the situation for electric vehicle manufacturers’ ADRs was mixed. PMIs show that the overall demand environment in the world’s largest electric vehicle market is improving, while Nio (NYSE:NIO) ADRs fell 4.2% after disappointing fourth-quarter figures.

Li Auto (NASDAQ:LI) ADRs moved in the opposite direction, up 3.8%, thanks to a better-than-expected forecast for the current quarter and strong delivery figures for the last quarter of 2022.

XPeng (NYSE:XPEV) ADRs also rose 0.7% in premarket trading.

The electric vehicle industry has been somewhat relieved by the sharp fall in lithium prices in recent weeks. This promises to support profit margins by reversing some of the large increases in battery prices that the industry has had to absorb over the past year.

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