Manufacturing Tipped to Lose Steam
China's manufacturing will probably slow further in May as a gauge of factory activity dipped to the lowest level in seven months. The preliminary HSBC China Manufacturing Purchasing Managers' Index declined to 49.6 in May, meaning manufacturing is in contraction compared with the previous month. The final reading was 50.4 in April, which was weak but still above the 50 point that divides expansion and contraction. The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds, according to HSBC economist Qu Hongbin.

SOE Earnings Growth Slows Despite Faster Revenue Growth
China's state-owned enterprises (SOEs) reported ¥14 trillion ($2.28 trillion, $1 = ¥6.14) in revenues and ¥689.13 billion in gross profits in the first four months of 2013, up 10.2% and 5.3% respectively from the same period of a year earlier, the Ministry of Finance said. Revenue growth was slightly faster but profit growth was 2.4 percentage points slower than in the first three months, indicating rising operating costs have made margins thinner. Central government-owned enterprises, the largest group of SOEs, reported ¥8.69 trillion in revenues and ¥536.24 billion in gross profits during the four months, up 9% and 12.8% respectively from a year earlier.

Chinese Consumers Optimistic: Nielsen
China's consumer confidence index remained unchanged at 108 in Q1 2013 compared with a quarter earlier even if the country's new leadership cracks down on extravagance and gift giving to government officials, consultancy Nielsen Holdings said. A reading above 100 indicates optimism while a reading below 100 indicates pessimism. The 108 quarterly reading was the third highest since 2010, as Chinese consumers were optimistic on expectations of higher incomes, Nielsen said, adding that the tepid growth of retail sales earlier this year wouldn't last throughout the year. Nielsen's global consumer confidence index was 93 in Q1 2013.

SUV Demand Strong
Demand for SUV is still strong in China despite a slowdown in the luxury auto market, Morgan Stanley says in its latest China Autos & Dealers report after visiting five dealerships in Shenzhen, Guangdong on May 21. The report says the slowdown has further squeezed the margin but it believes luxury dealers are doing better than last year due to healthier inventory and stable after-sales business.

Coal Sector Recovers on Imports Ban
China's coal sector has recovered in the past week on growing talks that the National Energy Administration will soon introduce a ban on low-rank coal imports, JPMorgan says in its latest China/Hong Kong Daily Views report. The report argues that while demand remains the key catalyst that is still largely absent, the ban should help ease domestic oversupply and stabilize coal prices.

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