  Considered an important macroeconomic indicator, the Purchasing Managers'
Index (PMI) on Manufacturing generally assumes that PMI announcements will
produce an impact on stock markets. International experience suggests that
stock markets react to negative PMI news. In this research, we empirically
investigate the stock market reaction towards PMI in China. The asymmetric
effects of PMI announcements on the stock market are observed: no market
reaction is generated towards negative PMI announcements, while a positive
reaction is generally generated for positive PMI news. We further find that the
positive reaction towards the positive PMI news occurs 1 day before the
announcement and lasts for nearly 3 days, and the positive reaction is observed
in the context of expanding economic conditions. By contrast, the negative
reaction towards negative PMI news is prevalent during downward economic
conditions for stocks with low market value, low institutional shareholding
ratios or high price earnings. Our study implies that China's stock market
favors risk to a certain extent given the vast number of individual investors
in the country, and there may exist information leakage in the market.
