China’s manufacturing PMI
In October 2016, China’s manufacturing PMI (purchasing managers’ index), which is an indicator of the country’s economic health, came in at 51.2 (MCHI) (FXI). This reading was the highest in the last 15 months. The index was 50.4 in September 2016.
The reading was well above the Reuters estimate of 50.4. The index was above 50 for the third consecutive month. A PMI reading of 50 is considered the neutral mark. A reading below 50 signifies contraction, while a reading above 50 signifies expansion. The index for China has remained above 50 seven times in the first ten months of 2016. This index gives more weight to large state-owned companies than to small private manufacturers.
The index that reflects the outlook of small private manufacturers is the Caixin Manufacturing PMI, which was at 51.2 in October compared to 50.1 in September. This was the fastest pace of improvement since March 2011. During the month, new order growth rebounded due to stronger demand. The October figures suggest expansion in China’s manufacturing sector.
China’s economy and crude oil
China’s oil demand is closely related to its manufacturing activities. Higher manufacturing activities translate to higher demand for oil. When crude oil demand falls, it negatively affects China’s crude oil imports. It also affects companies such as Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).