Asia: Disappointing Chinese data drags stocks lower

The disappointing PMI figures drove stocks low across the region, with the Shanghai Composite Index losing 1.70% and Hong Kong’s Hang Seng sliding 1.19%.

Elsewhere, Japan’s Nikkei Stock Average and Australia’s S&P/ASX 200 lost 2.10% and 1.27% respectively, while South Korea’s Kospi bucked the trend and climbed 0.28%.

The Caixin China manufacturing purchasing managers’ index rose to 48.3 in October from 47.2 in the previous month, edging higher of analysts’ expectations for a 47.5 reading, although it remained in contractionary territory, below 50.

China’s official manufacturing PMI, which was released on Sunday, missed expectations at 49.8, unchanged from the previous month and also below the 50 threshold that separates contraction from expansion.

“Any signs of improvement from China are a bonus,” said Spreadex’s financial analyst Connor Campbell.

“However, the markets haven’t exploded into life in light of that better than expected Caixin figure largely because in its pre-50 form it still signals the eight consecutive month of manufacturing contraction in the country.”

Late in October, the People’s Bank of China cut its interest rates for the sixth time in the last 12 months, while Beijing authorities said last month growth slowed to 6.9% in the third quarter, adding to concerns that China might miss its 7% annual growth target.

On the currencies front, the yen declined 0.06% against the dollar, while the Australian dollar climbed 0.10% against its US counterpart.

“It will be interesting to see how the Fed might react to China’s liquidity injection into the bond markets, that potentially weakening both Euro and Yuan, thus strengthening the US dollar,” said Michael Van Dulken, head of research at Accendo Markets.

“Such a situation surely makes it less likely that Yellen & Co. will act hawkishly before year-end as peer action is becoming increasingly important.”