China’s official manufacturing purchasing managers index PMI dipped below 50 for the first time since the recovery yesterday. The headline PMI declined to 49, below consensus of 49.8. Looking into the components probably provides an even gloomier picture. New exports order declined further to 45.6 from 48.6, indicating continued deterioration of global demand.
via Inside China’s ugly PMI – macrobusiness.com.au | macrobusiness.com.au.
Hillary Clinton has urged developing nations to be “smart shoppers” when accepting foreign aid from China and other new donors, as she became the first US secretary of state in more than 50 years to visit Burma on Wednesday.
In Rangoon, Mrs Clinton warned that powerful emerging economies may be more interested in exploiting natural resources than promoting real development.
“Be wary of donors who are more interested in extracting your resources than in building your capacity,” she said. “Some funding might help fill short-term budget gaps, but we’ve seen time and again that these quick fixes won’t produce self-sustaining results.”
HONG KONG — Faced with an economy that appears to be slowing faster than economists forecast even a month ago, the Chinese government on Wednesday unexpectedly reversed its yearlong move toward tighter monetary policy and took an important step to encourage banks to resume lending.
The central bank said that commercial banks would be allowed to keep a slightly lower percentage [0.5pc] of their deposits as reserves at the central bank. The change, which will take effect on Monday, means that commercial banks will have more money to lend, which could help to rekindle economic growth and a slumping real estate market.
via China, in Surprising Shift, Takes Steps to Spur Bank Lending – NYTimes.com.
The Harper Petersen Index shows a fall in container shipping rates in the last few months, reflecting a sharp decline in manufacturing exports.
Bloomberg (hat tip to macrobusiness.com.au) now reports that “the cost of hauling goods to Europe from China (its largest export market) is falling faster than rates for deliveries to the U.S. The price for shipments to Europe is down 39 percent to $511 per twenty-foot box since Aug. 31, according to figures from Clarkson Securities Ltd., a unit of the world’s largest shipbroker. That’s more than double the 18 percent slide in the cost to the U.S. West Coast, measured in 40-foot units.”
Looks like something positive is brewing in Europe, but I don’t want to jump the gun. China looks weak, US probably through its worst, Europe still faces plenty of pain even if fiscal reform and euro-bonds introduced. Game changer would be QE/asset purchases by Fed and ECB.
Asia rallied Monday on encouraging signs from Europe, with the Nikkei 225 testing 8300, the Seoul Composite (KOSPI) jumping to 1815, and Hang Seng above 18000. But a look at the quarterly chart of the Nikkei shows a long-term, bearish divergence on 63-day Twiggs Momentum, while the index is headed for a test of key support at 7000/7500. Unless we see a break above the descending trendline, the trend remains downward.
South Korea’s Seoul Composite index is headed for another test of 1650 according to the weekly chart. 63-Day Twiggs Momentum oscillating well below zero indicates a strong primary down-trend. Failure of support would offer a target of 1350*.
* Target calculation: 1650 – ( 1950 – 1650 ) = 1350
Hong Kong’s Hang Seng index recovered above 18000 Monday but the long-term trend remains downward. Steeply descending 63-day Twiggs Momentum warns of a strong primary down-trend.
* Target calculation: 16 – ( 20 – 16 ) = 12
The Shanghai Composite index did not share the enthusiasm of other Asian markets, testing support at 2375. Reversal of 13-week Twiggs Money Flow below zero warns of rising selling pressure. Failure of support at 2300 would offer a target of 2050*.
* Target calculation: 2300 – ( 2550 – 2300 ) = 2050
The offspring of party leaders, often called “princelings,” are becoming more conspicuous, through both their expanding business interests and their evident appetite for luxury, at a time when public anger is rising over reports of official corruption and abuse of power.
State-controlled media portray China’s leaders as living by the austere Communist values they publicly espouse. But as scions of the political aristocracy carve out lucrative roles in business and embrace the trappings of wealth, their increasingly high profile is raising uncomfortable questions for a party that justifies its monopoly on power by pointing to its origins as a movement of workers and peasants.
“There has been an intensification of labour unrest in the past week that is probably the most significant spike in unrest since the summer of 2010,” said Geoffrey Crothall of China Labour Bulletin, a Hong Kong-based labour advocacy group that monitors unrest in China.
….Factories are cutting the overtime that workers depend on to supplement their modest base salaries, after a drop in overseas orders.
U.S. Undersecretary of State Robert Hormats:
“What I am saying quite simply is that the U.S. is not passing judgment on whether or not China chooses to have state owned enterprises. Our concern is that to the extent they do, those SOEs should not receive benefits (e.g., preferred financing, exemption from anti-monopoly laws, generous export credits, etc) that put them at an artificial competitive advantage vis a vis private enterprises — of the U.S. or indeed any other country.
And I did not make the term ‘competitive neutrality’ up. This broad theme is incorporated in the (proposed trade deal called the) Trans Pacific Partnership and more specifically in Organization for Economic Cooperation and Development work.
My point is not to challenge the Chinese SOE model, it is to say that SOEs should operate within a system of global rules and norms, and that Chinese government support measures should not distort competition within that system….”
via Hormats Argues for ‘Competitive Neutrality’ Between U.S., China Firms – China Real Time Report – WSJ.
HSBC issued the preliminary “flash” version of its monthly manufacturing purchasing managers index survey – a closely watched non-government view on how China’s economy is faring. The survey fell to a contractionary reading of 48 for November, compared to a mildly expansionary reading of 51 last month. A reading of 50 separates expansion from contraction.
via Australian sharemarket extends losses after weak China survey | The Australian.
