ABN AMRO’s report looks at the expected January PMIs for China and predicts a general stabilization. They anticipate manufacturing PMIs to stay close to the neutral 50 level, while the services PMI may drop slightly but will likely remain in expansion. The report advises caution in interpreting Chinese data at this time of year. This is because the timing of the Lunar New Year holiday can distort the figures. These annual changes can make early-year data less reliable.

China’s PMI Data and Market Reactions

With China’s January PMI data coming soon, we expect numbers around the 50-point neutral mark, indicating stabilization. December 2025’s official manufacturing PMI was 49.7, which indicates contraction. Thus, this upcoming report will be vital for understanding the economy’s direction in early 2026. A flat reading could leave traders uncertain, as a surprising result may push the market out of its current range. We need to approach any new data carefully due to the Lunar New Year holiday, which occurs this year on February 17th. Factory shutdowns often start weeks before, meaning the January survey might not accurately reflect business activity. This typical uncertainty is already evident in the options market, with the implied volatility of the Hang Seng Index rising nearly 5% in the last week.

Positioning for Volatility

Given the unpredictability of the data, preparing for more volatility makes sense. Purchasing straddles on major China-focused ETFs allows traders to profit from significant price movements in either direction, particularly if the PMIs differ greatly from expectations. We recall how the market reacted strongly to the misleading January 2025 figures, leading to a sharp decline that quickly bounced back. For those invested in sectors sensitive to Chinese growth, like commodity futures for copper or iron ore, hedging is advisable. Buying puts could serve as affordable protection against potential downturns if the manufacturing sector shows unexpected weakness. Alternatively, waiting for a clearer picture from the combined January-February data release in March might be the safest option. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now