Tue, Jun 04, 2013 page15

• Asian factories cooling as export orders slide

  OUT OF STEAM? China’s PMI fell to its lowest level since October last year as exports and domestic orders fell. South Korea’s PMI also fell, while India’s is close to stalling

  • Reuters, BEIJING
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  Asia’s factory sector lost momentum last month as new export orders in the trading bellwethers of China, Taiwan and South Korea fell or cooled, reinforcing the view that the world economic outlook is dimming in the second quarter.

  The HSBC China purchasing managers’ index (PMI) fell to 49.2 last month, the lowest level since October last year and down from April’s final reading of 50.4. A reading below 50 suggests a contraction in activity from the previous month, while a reading above that level points to expansion.

  The China survey showed that total new orders and new export orders fell last month from April, suggesting weakness in both domestic and overseas demand.

  

  A woman carrying an umbrella walks past a stock quotation board outside a brokerage in Tokyo yesterday.

  Photo: Reuters

  New export orders also fell in Taiwan, while in South Korea, home to big brand names such as Samsung and Hyundai, new export orders growth eased to its weakest pace since January, the HSBC surveys showed.

  China’s HSBC PMI followed a similar government survey released on Saturday, which showed a slight pullback to 50.8 last month from 50.6 in April. However, it also pointed to falling orders from exports markets.

  The data, plus a fall in the official services PMI to 54.3 from 54.5, added to evidence that the world’s second-largest economy is losing further momentum in the second quarter.

  HSBC chief China economist Qu Hongbin (屈宏斌) said in the bank’s release that its final PMI “suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions.”

  “With persisting external headwinds, Beijing needs to boost domestic demand to avoid a further deceleration of manufacturing output growth and its negative impact on the labor market,” he added.

  Shares in China stretched their losing streak on Monday, after the nation’s lukewarm manufacturing activity aggravated concerns that the central bank may tighten money supply this month.

  The CSI300 of the leading Shanghai and Shenzhen A-share listings closed down 0.2 percent at 2,602.6 points. The Shanghai Composite Index slipped 0.1 percent. Both indexes failed to hold on to slim midday gains.

  “We think China’s economic growth will probably continue to slide,” Hong Kong-based Nomura chief China economist Zhang Zhiwei (張智威) said. “Our forecast of GDP growth in the second quarter is to slow to 7.5 percent from 7.7 percent in the first quarter.”

  The IMF and the Organisation for Economic Co-operation and Development last week cut their forecasts for this year’s economic growth to 7.75 percent and 7.8 percent respectively.

  China’s annual economic growth slowed to 7.7 percent in the first quarter from 7.9 percent in the previous quarter. The full-year annual growth of 7.8 percent last year was the weakest since 1999.

  The IMF’s cut brings it into line with recent revisions by private institutions, including Bank of America-Merrill Lynch, which pared its forecast this month to 7.6 percent from 8 percent, and Standard Chartered, which cut its estimate to 7.7 percent from 8.3 percent.

  ING last month reduced its prediction to 7.8 percent from 9 percent.

  Meanwhile, growth in India’s factory sector activity was close to stalling, with the HSBC PMI slipping to 50.1 last month from 51.0 in April. It marked the lowest reading since March 2009, although the index has stayed above 50 for more than four years.

  However, a factory production sub-index showed output was falling for the first time in more than four years as new orders growth slowed to a trickle.

  “Economic activity in the manufacturing sector slowed further in May as output contracted in response to softer domestic orders,” HSBC economist Leif Eskesen said, adding that power outages had contributed to the drop in output.

  South Korea’s PMI fell to 51.1 from 52.6 for the weakest reading since February.

  Russia’s manufacturing activity was the weakest in five months, with the PMI falling to 50.4 last month from 50.6 in April.
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