Asia: Stocks slide after disappointing Chinese PMI

Asian equity markets extended losses on Wednesday, after disappointing manufacturing data from China added to investors’ worries.

The Shanghai Composite Index reversed Tuesday’s gains to fall 2.19%, while Hong Kong’s Hang Seng Index fell 2.26%

Caixin's preliminary Chinese manufacturing sector purchasing managers' index dipped to a reading of 47.0 for September - a 78-month low - down from 47.3 in August and compared with expectations for a reading of 47.5.

"Today’s weaker-than-expected PMI will add to mounting concerns over Chinese growth,” said Julian Evans-Pritchard, China economist at Capital Economics.

“That said, Caixin’s manufacturing PMI has not provided a particularly good reading of the health of the broader economy in recent months and so it is still too early to tell whether or not the Chinese economy has stumbled in September.”

Meanwhile, speaking in Washington during a meeting with US President Barack Obama, Chinese president Xi Jinping reassured US business leaders that China would push ahead with economic reforms.

Elsewhere, Japanese markets were still closed and will reopen on Thursday, while South Korea’s Kospi declined 1.89% and Australia’s S&P/ASX 200 shed 2.07%, bringing its losses for the week to date to over 3%.

Australian stocks have been particularly affected by the slowdown in Chinese markets, the country’s largest export market.

Currencies in emerging markets fell further, with the Indonesian rupiah sliding 0.9% to reach a new 17-year low against the dollar, while the Malaysian ringgit and the Australian dollar fell 1.2% and 0.8% respectively.

Analysts hinted the Fed’s decision to hold interest rates based on the global and financial developments relating to growth in China, meant the dollar was more exposed to economic data releases from China.

“The vulnerability the China markets may experience from a contractionary flash PMI which has been the lowest in 78 months will most likely ripple back to the USD exposing it to further vulnerability and weakness,” said FXTM research analyst Lukman Otunuga.

“The potential losses the USD may face due to the uncertainty revolving around the China markets should translate to bullish momentum regained within gold.”