Share

Asian stocks, currencies sink after China factory data

Hong Kong - A plunge in a gauge of Chinese factory activity stoked fresh fears about the world's number two economy and the global outlook on Wednesday, sending Asian markets tumbling after a heavy sell-off in New York and Europe.

Emerging market currencies - already under pressure from an expected US interest rate hike and weak growth - also took a battering as investors rushed into lower-yielding, or safer, assets such as the yen while oil prices eased.

The losses extended a general downward spiral across the world as dealers fret over the state of the global economy, with a US recovery offset by China posting growth at 25-year lows, and Japan and the eurozone also struggling.

On Wednesday Hong Kong dived three percent and Shanghai lost more than two percent after China's closely watched Purchasing Managers' Index (PMI) of manufacturing activity for September came in at a six-and-a-half-year low and showed the sector contracted further.

The preliminary reading released by financial publisher Caixin came in at 47.0, down from August and missing expectations of 47.5. A result below 50 indicates shrinkage and anything above points to growth.

"The decline indicates the nation's manufacturing industry has reached a crucial stage in the structural transformation process," He Fan, chief economist at Caixin Insight Group said in a statement accompanying the figures.

He blamed the weakness mainly on sluggish external demand for Chinese goods and lower export prices.

The figures come a day after the Asian Development Bank (ABD) said it had lowered its growth expectations for Asia because of the sharp growth slowdown in China, a key driver of global trade.

"It's a confirmation of fears that were existing in the market already that China is in fact doing worse than we had been led to believe and there's a lot of uncertainty about where that economy really is," Emma Lawson, senior currency strategist at National Australia Bank in Sydney, told Bloomberg News.

Among Asian stock markets Shanghai sank 2.16% and Hong Kong plunged 2.98% by lunch, while Sydney - where a number of firms with strong China links are listed - shed 2.06% in late trade.

Seoul and Singapore were each down more than one percent while Taipei gave up 2%.

Flight to safety

The safe haven yen also advanced. The dollar bought ¥119.80 compared with ¥120.14 in New York on Tuesday, while the euro was at ¥133.41 against ¥133.74.

World bourses have been on a slide since mid-August when China announced a shock devaluation of its yuan currency, feeding worries the economic giant is in more trouble than first thought and raising questions about Beijing's ability to deal with the crisis.

The country has suffered a slew of weak data, from trade and investment to consumer spending and inflation, despite authorities cutting interest rates five times since November.

On foreign exchanges the Australian dollar, which is heavily reliant on resources exports to China, tumbled 0.77% on Wednesday, while other emerging units also suffered in a flight to safety.

South Korea's won lost 0.64%, the Indonesian rupiah shed 0.68% and the Malaysian ringgit was 0.90% lower.

The Thai baht and Singapore dollar were also lower.

Adding to selling pressure in weaker currencies are expectations of a US rate hike after three Federal Reserve presidents said they expect to see a lift-off by the year's end.

Their comments came after the bank held off moving last week, blaming threats from China's slowdown and turmoil in global markets, which in turn fuelled worries about the health of the United States.

On Tuesday US stocks and European bourses tanked on world growth concerns as well as the wider impact of Volkswagen emissions scandal on the auto sector.

The Dow, S&P 500 and Nasdaq all lost more than one percent. There were deeper losses in Paris, which shed 3.42%, while London fell 2.83%. Frankfurt dumped 3.80%, with VW shares losing 35% over two days.

Oil prices tanked after the data from China, the world's biggest energy user, was released.

US benchmark West Texas Intermediate was 0.32% lower and Brent crude retreated 0.67%.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.89
+0.2%
Rand - Pound
23.87
+0.1%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.12
+0.1%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders