Good news and bad news. Now that China may be nearing the end of their tightening spree, news of manufacturing hitting a slump may actually be beneficial for the equity markets. Whether or not there is a new stimulus plan that will eventually be announced is hard to predict, but it is getting more obvious that the government will need to lay off their effort to slow the economy, because it is working.
Bloomberg reported on two important economic releases out of China on Monday night. China‘s manufacturing activity increased in October, according to Markit. The HSBC Manufacturing Purchasing Managers‘ Index rose to 51.0 in last month, compared with 49.9 in September. Another report had a bit of contradiction as China‘s October Manufacturing PMI Fell to 50.4.
In fact, the Chinese manufacturing index dropped to the lowest level since February 2009, bolstering the case for fiscal or monetary loosening to support the expansion of the world‘s second-biggest economy. The Purchasing Managers‘ Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today. That was lower any of 16 economists estimated in a Bloomberg News survey that had a median forecast of 51.8. A reading above 50 indicates expansion.
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There are other factors in play as well. Due to the slowdown in Europe, there is a slowing of exports from China. Even as there are reports that China is very involved in propping up the Euro for their benefit, the additional strain of European imposed austerity measures are showing up throughout Asia.
One of the areas that is this is becoming evident is the shipping loads. According to the South China Morning Post, September new orders are 940K deadweight metric tons, the least since June 2006, citing National Development and Reform Commission.
- As of Sept. 30, 30% of nation‘s yards had‘t received orders
- 9M orders drop 43% on year to 29m dwt
- Sept. ship completions jump 67% M/m to 7.86m dwt
Is this enough to cause the end of rate hikes? Perhaps, but it is interesting that all of this is being taken rather well by the equity markets in China, Taiwan and Korea during the early Tuesday morning sessions.