MW: Asian shares drop as China PMI triggers doubts about economy
The latest signs that China is struggling to turn its economy around in the fourth quarter sent most Asian markets lower and the onshore yuan sharply weaker on Monday.
In late Asian afternoon trade, the yuan USDCNY, +0.3293% fell as much as 0.46% to 6.3464, marking its biggest one-day depreciation since the days after Chinese officials devalued the currency in August. The onshore yuan last traded at 6.3438, compared with 6.3175 at its close on Friday.
The currency fell even as China’s central bank fixed the currency at 6.3154 against the U.S. dollar earlier, 0.54% stronger than Friday’s daily reference rate, which represented the largest percentage change since July 2005.
The onshore yuan can trade 2% above or below the daily fixing level.
Meanwhile, Japan shares fell from a two-month high, leading most of the region lower, as a rally fueled by stimulus hopes there fizzled.
The Nikkei Stock Average NIK, -2.10% fell 2.1%, led by sectors seen as bellwethers of the domestic economy: utilities, financial firms and consumer-discretionary companies. The losses signal disappointment after the central bank held back from additional stimulus measures on Friday.
Australia’s S&P/ASX 200 XJO, -1.40% lost 1.4%, Hong Kong’s Hang Seng Index HSI, -1.19% fell 1.2% and the Shanghai Composite Index SHCOMP, -1.70% shed 1.7%.
South Korea’s Kospi SEU, +0.28% however, gained 0.3%.
On Monday, a private gauge of China’s manufacturing activity, the Caixin China manufacturing purchasing managers index, rose to 48.3 in October, marking the eighth-straight month of contraction. The reading, which tends to capture more private enterprises than the official gauge, came in at 47.2 in September.
A reading above 50 indicates expansion in activity, while one below that level signals contraction.
On Sunday, an official gauge of Chinese factory activity in October contracted unexpectedly. China’s manufacturing purchasing managers index remained unchanged at 49.8 in October from a month ago, the third-straight month the reading came in below 50.
“There’s some fairly big pessimism that the economy will continue slowing in the fourth quarter,” said Evan Lucas, a market analyst at brokerage IG.
Lucas added that the stronger yuan fixing likely was a reaction to Sunday’s data, but also a signal of Chinese authorities’ intentions to moderate the currency’s decline since the devaluation.
