China fac­tory slump rings alarm bells

Ja­pan of­fers hope as ex­ports rally

The Star Early Edition - - BUSINESS REPORT - Reuters

CHINA’S fac­to­ries looked to have hit an air pocket in Novem­ber as a pri­vate survey showed out­put fall­ing for the first time in six months, adding to con­cerns about slow­ing eco­nomic mo­men­tum and to the case for fur­ther pol­icy eas­ing from Beijing.

Yet there was a rare glimpse of good news from Ja­pan, which re­ported sur­pris­ingly strong growth in ex­ports for Oc­to­ber, a shift that should get a boost from the lat­est dive in the yen.

The Ja­panese cur­rency carved out a seven-year trough on the dol­lar yes­ter­day and a six-year low on the euro, and seemed set for fur­ther losses given the out­look for sus­tained pol­icy stim­u­lus from the Bank of Ja­pan (BOJ).

In China, the flow of data was again dis­ap­point­ing as an early read­ing on HSBC/Markit’s man­u­fac­tur­ing pur­chas­ing man­agers’ in­dex (PMI) showed a drop to a six-month low of 50 in Novem­ber, from 50.4 in Oc­to­ber.

A cool­ing prop­erty sec­tor, er­ratic for­eign de­mand and over­ca­pac­ity have weighed on its man­u­fac­tur­ers and the broader econ­omy this year de­spite a steady stream of stim­u­lus mea­sures.

China’s an­nual growth slowed to 7.3 per­cent in the third quar­ter, leav­ing 2014 on track to be slow­est in 24 years.

“We still see uncer­tain­ties in the months ahead from the prop­erty mar­ket and on the ex­port front. We think more mon­e­tary and fis­cal eas­ing mea­sures should be de­ployed,” Hong­bin Qu, the chief China economist at HSBC, said.

The Markit/JMMA ver­sion of Ja­pan’s PMI was more mixed. While the head­line in­dex edged down to 52.1 in Novem­ber, from 52.4 in Oc­to­ber, out­put ex­panded at its fastest clip in eight months.

Firms may have been re­spond­ing to bet­ter off­shore de­mand as Ja­pan’s ex­ports rose at an an­nual pace of 9.6 per­cent in Oc­to­ber, more than dou­ble mar­ket forecasts.

“Ex­ports will con­trib­ute to growth in the fourth quar­ter and help re­coup some of the weak­ness we’ve seen in Ja­pan’s do­mes­tic de­mand,” Shuji Tonouchi at Mit­subishi UFJ Mor­gan Stan­ley Se­cu­ri­ties said.

Pol­i­cy­mak­ers were stunned ear­lier this week when data showed the econ­omy fell into re­ces­sion in the third quar­ter as a sales tax hike weighed on con­sumer spend­ing and business in­vest­ment.

The grim news un­der­lined the ne­ces­sity of the BOJ’s su­per-loose pol­icy and sank the yen. The US dol­lar surged as high as ¥118.26 (R11.119) yes­ter­day, which should give Ja­panese ex­porters a com­pet­i­tive boost over time.

PHOTO: AP

Pedes­tri­ans stand in front of an elec­tronic stock in­di­ca­tor of a se­cu­ri­ties firm in Tokyo, yes­ter­day. Asian stocks fal­tered as China’s man­u­fac­tur­ing weak­ened and the lat­est US Fed­eral Re­serve min­utes re­minded in­vestors that US in­ter­est rates are likely to rise next year. Ja­pan’s Nikkei 225 in­dex closed at 17 300.86.

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