Core Viewpoint - The weak PMI in October is primarily due to weak demand, with deeper issues stemming from high inventory levels negatively impacting production indices [2][68]. Group 1: Manufacturing PMI Analysis - The manufacturing PMI fell to 49% in October, down 0.8 percentage points from the previous month, indicating a contraction in the manufacturing sector [2][68]. - The production index dropped significantly, falling to 49.7%, which is a decrease of 2.2 percentage points, marking a return to the contraction zone for the first time in six months [2][9]. - New orders index saw a smaller decline of 0.9 percentage points, indicating that while demand is weakening, it is not as severe as the production index [2][9]. Group 2: Causes of Weakness - The significant drop in the production index may be attributed to the retreat of the "rush production" effect, high inventory levels, and the nature of the PMI as a month-on-month indicator [2][14]. - In September, there was a temporary "stock-up rush" phenomenon, which led to a spike in production and inventory levels, but this created constraints for October's production capacity [14][68]. - The new export orders index fell sharply by 1.9 percentage points to 45.9%, the second-lowest point of the year, influenced by fluctuating tariff policies [3][69]. Group 3: Domestic Demand and Investment - Domestic demand remains resilient overall, but the acceleration of debt reduction has weakened investment demand, particularly affecting high-energy-consuming industries and construction [3][23]. - The PMI for high-energy industries dropped to 47.3%, reflecting strong pressure on real estate and infrastructure investment due to debt reduction efforts [3][23]. - The construction PMI also remains low, falling to 49.1%, but recent fiscal policies are expected to alleviate some investment pressures, with the business activity expectation index for construction rising by 3.6 percentage points [3][23]. Group 4: Future Outlook - Despite the recent setbacks in manufacturing sentiment, the short-term disturbances from high inventory levels are expected to dissipate, and proactive fiscal policies are being implemented [4][35]. - The manufacturing sector is anticipated to maintain resilience as external uncertainties ease and new policies are rolled out to support production and demand [4][35]. - Continuous monitoring of the marginal changes in manufacturing sentiment will be essential as the situation evolves [4][70]. Group 5: Non-Manufacturing PMI Insights - The non-manufacturing PMI showed a slight increase to 50.1%, indicating some recovery in the service sector, driven by holiday travel and pre-sales activities [5][51]. - The service sector PMI rose by 0.1 percentage points, with the employment index also improving, suggesting a positive trend in service-related employment [5][55]. - In contrast, the construction sector experienced a slight decline in PMI, although the new orders index saw a significant rebound, increasing by 3.7 percentage points [6][60].

Market Overview - The bond market experienced fluctuations and closed lower during the week of May 26 to May 30, 2025, with the China Bond Comprehensive Wealth Index (CBA00201) remaining flat and the China Bond Comprehensive Full Price Index (CBA00203) declining by 0.08% [2][11] - Interest rates on bonds generally rose, with short-term rates increasing more than long-term rates, specifically, the yields on 1-year, 3-year, 5-year, and 10-year government bonds rose by 1.5 basis points and 0.6 basis points respectively [11][12] Economic Conditions - The funding environment was relatively loose, but the economic fundamentals remained weak, with a slight increase in the R007 rate to 1.70% due to month-end effects [12] - The manufacturing PMI for May rose by 0.5 percentage points to 49.5%, still below the 50% threshold, indicating ongoing weakness in domestic demand despite some recovery in external demand [12][13] Policy and Regulatory Changes - The first batch of nine credit bond ETFs officially launched a general pledge repo business on May 29, 2025, which is expected to enhance financing channels for investors and improve capital efficiency [3][15] - The approval of these ETFs for general pledge repo business is anticipated to facilitate rapid development in the credit bond ETF market [15] REITs Market Dynamics - The REITs market continued to show strong interest, driven by declining bond yields and expectations of economic recovery, with property types like industrial parks and rental housing performing particularly well [14] - Recent approvals for new REITs indicate a significant acceleration in the market, although the high demand may increase the difficulty of new issuances [14] Fund Performance Tracking - Short-term bond fund indices recorded a slight increase of 0.01% last week, while medium to long-term bond fund indices saw a decrease of 0.02% [4][5] - REITs funds outperformed with a weekly increase of 0.90%, accumulating a year-to-date return of 37.79% [10][17]

Core Viewpoint - The article highlights the weakening of the US dollar, attributed to the erratic trade policies of the Trump administration and growing concerns over the US fiscal situation, leading to a crisis of market confidence [1][5]. Group 1: Dollar Performance - The US dollar index is expected to decline by 0.4% in May, marking the fifth consecutive month of losses [1][10]. - The volatility of the dollar is linked to the inconsistent trade policies, which have caused investors to seek alternatives to US assets [2][5]. Group 2: Trade Policy Uncertainty - Recent court rulings have created a confusing environment for investors, with a trade court blocking tariffs just as an appeals court reinstated them, indicating ongoing uncertainty [3][4][6]. - The unpredictable nature of these policies is likened to a "ticking time bomb," fostering a cautious market sentiment [5]. Group 3: Economic Data and Recession Concerns - Recent economic data, including a rise in initial jobless claims to 240,000, has heightened fears of a recession, as the first quarter GDP contracted by 0.2% [7]. - The weak demand for long-term bonds from developed economies like the US and Japan reflects broader concerns about fiscal debt levels [8]. Group 4: Emerging Markets - In contrast to the weakening dollar, emerging market currencies have shown strength, with an index tracking these currencies rising by 2.2%, the largest monthly gain since November 2023 [9][11].