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Asian stock markets rattled again after fresh evidence of Chinese slowdown Asian stock markets rattled again after fresh evidence of Chinese slowdown
(about 4 hours later)
Asia Pacific stock markets were rattled again on Tuesday after Chinese manufacturing showed further signs of weakness, adding to evidence of an inexorable slowdown in the world’s second biggest economy.Asia Pacific stock markets were rattled again on Tuesday after Chinese manufacturing showed further signs of weakness, adding to evidence of an inexorable slowdown in the world’s second biggest economy.
Two closely watched barometers of factory activity released on Tuesday were at multi-year lows, reviving concerns about the state of the country’s economy which caused a major sell-off on the world’s financial markets last week.Two closely watched barometers of factory activity released on Tuesday were at multi-year lows, reviving concerns about the state of the country’s economy which caused a major sell-off on the world’s financial markets last week.
The Nikkei share index in Japan was down more than 2%, worsened by figures which showed Japanese firms are not investing in new plant and equipment because of concerns about demand from China. Related: Lagarde warns of Chinese slowdown as markets slide again - live updates
The Chinese and Hong Kong stock markets were also in the red. The Shanghai Composite index was down 1.76% after the lunchtime break while the Hang Seng was off 0.67%. The Nikkei share index in Japan closed down 3.8%, worsened by figures which showed Japanese firms are not investing in new plant and equipment because of concerns about demand from China.
In Korea, the Kospi index was down 1% after worse than expected export figures and in Australia the ASX200 index was down 1.3% as economic growth threatens to dip into negative territory for the latest quarter when figures are released on Wednesday. The Chinese and Hong Kong stock markets were also in the red. The Shanghai Composite index was down 1.2%.
In Korea, the Kospi index was down 1% after worse than expected export figures and in Australia the ASX200 index closed down 2.12% as economic growth threatens to dip into negative territory for the latest quarter when figures are released on Wednesday.
China’s official manufacturing index based on a survey of factory purchasing managers fell last month to 49.7, the lowest level since August 2012, from 50.0 in July.China’s official manufacturing index based on a survey of factory purchasing managers fell last month to 49.7, the lowest level since August 2012, from 50.0 in July.
The index, compiled by the Chinese Federation for Logistics and Purchasing, is based on a 100-point scale on which numbers above 50 indicate expansion.The index, compiled by the Chinese Federation for Logistics and Purchasing, is based on a 100-point scale on which numbers above 50 indicate expansion.
A separate survey, the Caixin purchasing managers’ index, fell to a six-year low of 47.3 from 47.8 in July. The number was slightly better than the preliminary reading released last month which prompted the Black Monday panic.A separate survey, the Caixin purchasing managers’ index, fell to a six-year low of 47.3 from 47.8 in July. The number was slightly better than the preliminary reading released last month which prompted the Black Monday panic.
Caixin’s survey focuses on smaller, private enterprises while the federation’s survey is weighted toward larger, state-owned companies in China’s manufacturing industry, which employs tens of millions. Taken together, the surveys provide a bleak picture of stubborn weakness in the overall economy.Caixin’s survey focuses on smaller, private enterprises while the federation’s survey is weighted toward larger, state-owned companies in China’s manufacturing industry, which employs tens of millions. Taken together, the surveys provide a bleak picture of stubborn weakness in the overall economy.
China’s economic growth held steady at 7% in the latest quarter ending in June, which was the weakest performance since the 2008 global crisis. Officials hope to maintain the growth rate for the rest of the year but many economists doubt the target will be met.China’s economic growth held steady at 7% in the latest quarter ending in June, which was the weakest performance since the 2008 global crisis. Officials hope to maintain the growth rate for the rest of the year but many economists doubt the target will be met.
In the latest attempt to shore up flagging economic growth, China’s communist leaders cut interest rates last week, the fifth time they have done so in nine months. There has also been heavy intervention to shore up the stock market.In the latest attempt to shore up flagging economic growth, China’s communist leaders cut interest rates last week, the fifth time they have done so in nine months. There has also been heavy intervention to shore up the stock market.
“The policies coming out of China with regards to its equity markets are a cat’s cradle of contradictions,” said Angus Nicholson of IG in Melbourne.“The policies coming out of China with regards to its equity markets are a cat’s cradle of contradictions,” said Angus Nicholson of IG in Melbourne.
“Reports that China will no longer support the stock market were followed up by clear intervention in the market last Thursday.“Reports that China will no longer support the stock market were followed up by clear intervention in the market last Thursday.
“It seems pretty clear that there are deep disagreements at the highest levels of the Chinese government over what to do with the equity markets. The Chinese government is no monolith, and many departments and organisations can pursue policies counter to each other.”“It seems pretty clear that there are deep disagreements at the highest levels of the Chinese government over what to do with the equity markets. The Chinese government is no monolith, and many departments and organisations can pursue policies counter to each other.”
The central bank rate cut had been expected after a slew of disappointing recent economic indicators, including a larger-than-expected 8.3% decline in July exports, weak retail sales growth and slowing industrial production and investment.The central bank rate cut had been expected after a slew of disappointing recent economic indicators, including a larger-than-expected 8.3% decline in July exports, weak retail sales growth and slowing industrial production and investment.
Last month’s business sentiment was also weighed down by sharp declines in China’s stock market and a surprise currency devaluation that roiled markets worldwide and a devastating explosion in the busy port of Tianjin.Last month’s business sentiment was also weighed down by sharp declines in China’s stock market and a surprise currency devaluation that roiled markets worldwide and a devastating explosion in the busy port of Tianjin.
“Recent volatilities in global financial markets could weigh down on the real economy, and a pessimistic outlook may become self-fulfilling,” said He Fan, Caixin Insight Group’s chief economist.“Recent volatilities in global financial markets could weigh down on the real economy, and a pessimistic outlook may become self-fulfilling,” said He Fan, Caixin Insight Group’s chief economist.
“Macroeconomic regulations and controls must continue and fresh reform measures must be introduced. Fine-tuning should go hand in hand with speedier implementation of structural reform in order to release the full potential of growth and lead the market to confidence.”“Macroeconomic regulations and controls must continue and fresh reform measures must be introduced. Fine-tuning should go hand in hand with speedier implementation of structural reform in order to release the full potential of growth and lead the market to confidence.”