ASIA MORNING BID China PMIs cap off a rough month

Financial markets journalist Jamie McGeever previews the day ahead in Asian markets.

On Thursday, a slew of important economic statistics from Asia will be released, including the latest official Chinese purchasing managers index surveys, which might have a major impact on the course of the region’s markets in the next week.

Markets, particularly currencies, might be influenced by data such as India’s GDP for the second quarter, Japan’s retail sales and industrial output, Hong Kong’s retail sales, Australia’s credit, and South Korea’s industrial production. After another ‘risk on’ day on Wednesday, regional markets are expected to begin higher on Thursday. Futures markets are no longer expecting a quarter-point raise before the end of the year as a result of downwardly revised U.S. GDP numbers.

Financial constraints have been eased, encouraging global equities to rise for a fourth consecutive day, as the dollar has fallen and U.S. Treasury rates have fallen. This week has been their best in seven, with a 2.5% gain.

Six out of the previous seven trading days in Asia have seen stock prices rise. The financial and economic difficulties in China have made this a difficult month for Asia. August’s 6% drop in Asia ex-Japan equities was the worst monthly performance since February.

The NBS manufacturing PMI for China is scheduled to be released on Thursday, and although experts anticipate a little increase to 49.4 from July’s 49.34, this would still be the sixth consecutive month that the index has been below the 50.0 threshold that distinguishes growth from contraction.

The service sector is still expanding, although slowly, while manufacturing is stagnant due to low consumer demand.

Chinese government and business have taken a number of actions to improve investor confidence and prop up domestic markets, and these efforts have begun to bear fruit. This week was the first time since January that Chinese equities have recorded consecutive increases of 1% or more. However, the index is on course for a 5.5% fall for the month of August as a whole, capital outflows have escalated, the currency has devalued approximately 2%, and a collapsing property sector has caused widespread downgrades to the overall GDP forecast. On Wednesday, China’s biggest private property developer, Country Garden, said it “felt deeply remorseful” for its record loss of 48.9 billion yuan ($6.72 billion) in the first half of the year and issued a warning of default risks if its financial status continues to worsen. While two of China’s major banks reported slowing profit growth on Wednesday, a senior central bank official was cited as stating that banks should expand private sector lending as a way for Beijing to stimulate the economy.

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