China's manufacturing picks up--maybe.

09/16/2010 10:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

But what does it mean?

Time to get out the thumbscrews and the Spanish boot and torture the data.

Numbers released on September 1 showed manufacturing rebounding in China for August after a weak July.

It could mean that China’s “slowdown” won’t be as slow as feared. Or it could mean absolutely nothing since manufacturing activity usually speeds up in August as factories go back to normal operation after scheduled maintenance in July.

The Purchasing Managers’ Index climbed to 51.7 from 51.2 in July. Economists had been a reading of 51.5. (Anything over 50 shows manufacturing is expanding.) 

Not everything was rosy in the sector, however. An input price index rose 10.1 points in August possibly signaling an increase in company costs. 

On the Shanghai market stocks in the materials and commodities sectors rose on the news. Shares of Baoshan Steel, for example, rose by 1.2% and shares of Anhui Conch, China’s biggest cement maker, gained 1.1%.

The big unknown, however, remains what Beijing plans for banks and the real estate sector. So on the same day that China released good news on manufacturing output, gains in the industrial sector were outweighed by losses among property developers. China Vanke, the country’s biggest publicly traded property developer fell 0.7% and No. 2 Poly Real Estate, dropped 0.8%. The shares retreated after reports by the Xinhua news agency that the China Banking Regulatory Commission will act to restrain “speculative” real estate investment. Nothing new in that but in the absence of any real news about government intentions, rumors and old news send investors scurrying.

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