China’s factory activity contracted for a second straight month last month, signaling weakness in an area that Beijing is betting on to drive the economy.
The official manufacturing purchasing managers’ index was at 49.5, the Chinese National Bureau of Statistics (NBS) said yesterday. That was the same reading as the previous month and in line with economists’ prediction in a Bloomberg survey. Any number above 50 points is considered an expansion.
A sub-index of new orders at factories inched lower to 49.5 as demand weakened, while a gauge measuring new export orders was unchanged at 48.3.
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Meanwhile, the non-manufacturing measure of activity in construction and services fell to 50.5, the statistics office said. That compares with a forecast of 51, and a May reading of 51.1.
In a statement accompanying the data, NBS analyst Zhao Qinghe (趙清河) said “the foundation for sustained recovery and improvement still needs to be consolidated.”
Trade tensions have added to the challenges. The US and the EU — two of China’s biggest export markets — have sounded the alarm over a surge in cheap Chinese exports, which they say are unfairly bolstered by Beijing’s massive subsidies. Both have threatened to impose tariffs on China’s electric car exports, along with other sectors where Beijing is leading on price.
The drop in the construction index to 52.3, from 54.4 in May, marked its weakest print since July last year and suggests that state infrastructure spending, a key support for the recovery, lost steam, Bloomberg Economics said. That suggests bolder stimulus might be needed.
“Policymakers will likely focus on fiscal measures to support the economy, given the constraints on monetary easing due to currency pressures,” Guotai Junan International Holdings Co (國泰君安國際控股) economist Zhou Hao (周浩) said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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