China data pulls Asian stocks lower

The falling demand for manufactured goods in China has pulled down Asian stocks as well as the price of a barrel of oil [Xinhua]

China’s Shanghai Composite (SHCOMP) index fell 2.43 per cent on opening trade Monday as local markets appeared unimpressed by the central bank’s pledge to maintain prudent monetary policy in the second half of this year.

The benchmark SHCOMP closed at 3,663 on Friday – little changed from the day before – after the central bank also said it would inject 50 billion yuan ($8.05 billion) into the money markets through seven-day reverse bond repurchase agreements.

But at press time, it fell to 3,574 on persistent fears that the Chinese economy is stalling, particularly with worse-than-expected manufacturing data indicating that both domestic and overseas demand for commodities was waning.

On August 1, the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing reported that the manufacturing purchasing managers’ index (PMI) had fallen from 50.2 to 50.0 in July.

But according to a final monthly report by Caixin Media/Markit – a financial information services provider – the PMI for July was worse than previously thought.

The flash report showed that the PMI was at 48.2, but the final assessment released earlier today showed that the actual number stood at 47.8.

The bad news sent Asian stocks spiraling downward: Japan’s Nikkei fell by 0.5 per cent, but regained some ground after the noon lunch break.

By 1pm both Hong Kong’s Hang Seng and South Korea’s Kospi dropped by 1.1 per cent. Australia’s SP ASX 200 also suffered a fall of 0.4 per cent.

There are now fears that all the gains in Asian stocks in 2015 may be reversed as fears about China’s slowing economy persist.

On Friday, US stocks fell slightly as markets closed.

Analysts will be sure to watch for a further drop in oil prices this week as an indicator of which way markets will head.

Oil prices have fallen about 15 per cent in July, but Monday trading in Asia seems to point to a further slip.

Oversupply – Iran announced it will unload an extra 500,000 barrels a day as soon as sanctions are lifted – and falling demand pushed US crude down to $46.38 and Brent to $51.81 on Monday.

The BRICS Post with inputs from Agencies