Asian markets shook off weak to mixed news about the health of the region’s huge manufacturing sector – especially those in China, Japan and South Korea, the powerhouses – to stage a reasonable bounce on the first day of trading of the final quarter of 2015.
It continued the mostly solid day of trading on the final day of the third quarter. Tokyo’s Nikkei jumped almost 2%, probably in the belief that weak data might bring another round of stimulatory spending; Australia was up 1.8%, and other markets had reasonable gains. Shanghai rose modestly ahead of a week long holiday starting yesterday.
China’s official manufacturing purchasing managers index for September rose to 49.8 from 49.7 in August. Economists expected the sentiment index to be unchanged. However, the reading below 50 still indicates a contraction in manufacturing activity.
This survey is taken among the big companies in China’s huge manufacturing sector. It showed continuing contraction, but not as fierce as elsewhere. The services survey was positive (meaning expanding), but growth remains stuck at a 14 month low.
The second survey for China – from Caixin/Markit is taken from small to medium firms and is a bit more volatile and conservative. Its flash report last week saw a 78 month low hit of 47 (meaning its well under the 50 reading which separates contraction from expansion).
Yesterday its final report, was down slightly at 47.2 in September compared with 47.3 in August. But while that was up on the flash reading, a small positive it was another 78 month low.
But unlike last month, the news didn’t trigger a sell off on markets – the reaction was a bit ho hum!
The Bank of Japan’s latest corporate survey showed Thursday that big manufacturers turned more cautious about the economy over the third quarter, underscoring challenges facing exporters because of China’s economic slowdown.
The Tankan is a very large, quarterly survey of business sentiment with a near-100% response rate from thousands of companies, making it one of the best barometers of economic health in Japan.
In fact it underlined the growth belief that the region’s second biggest economy is heading for a small recession, a view that seemed to be confirmed by the weak industrial production figures and retail sales data released on September 30.
The BOJ survey’s main index measuring the mood among big manufacturers about present business conditions fell to plus 12 from plus 15 in June, despite record-high profits for Japanese firms.
And while big Japanese service companies (retailers, telcos, etc) reported an upturn in confidence, it wasn’t enough to offset the feeling that the economy is heading into the red – once again accompanied by the return of mild price deflation (at the moment).
But unlike China and South Korea, Japan’s huge manufacturing sector is still expanding with a reading of 51.0, down from the 51.7 reported for August, which was the best growth since the start of this year.
South Korea’s survey of manufacturing sector was again negative with another month of contraction reported yesterday.
South Korea purchasing manager’s index compiled by Markit/Nikkei was 49.2 in September, up from 47.9 in August, but still well under the 2015 high of 51.1 reported for February of this year.
And the latest trade data for South Korea showed another big surplus as exports fell, but imports fell even faster, thanks mostly to weakening commodity prices, especially oil and gas.
Exports dropped 8.3% in August from a year earlier, better than the downwardly revised 14.9% fall (previously 14.7%) in July. Imports were down 21.8% in August from a year ago, the biggest drop since September 2009. This was far steeper fall than the 18.3% slide reported for July.
That saw the country’s trade surplus more than double in August to $US8.94 billion from $US4.27 billion in July, and the second largest after the $US9.8 billion reported for June this year.
And finally and unusually, Australia’s first of month survey of manufacturing was one of the best in the region – with a small rise due to the impact of the lower dollar. It was the third month in a row that an improvement has been reported.
The Australian Industry Group Australian Performance of Manufacturing Index rose 0.4 points in September from August to 52.1.
“The lower Australian dollar is a clear driver with local producers winning against imports in the domestic market and making further progress in export markets," Group Chief Executive Innes Willox said in yesterday’s statement.
