Wij gebruiken een aantal cookies om u de best mogelijke browser ervaring te bieden. Door deze website te blijven gebruiken, gaat u akkoord met ons gebruik van cookies. U kunt hier meer leren over ons cookie-beleid of door op de link te klikken onderaan iedere pagina van onze website.
The slight expansion means state-owned manufacturing has remained in expansion since September 2012. It can be argued that this gauge is not a true representation of the Chinese manufacturing landscape, as state-owned numbers are not accurate as only 2000 state employed managers respond. Most pundits point to the HSBC manufacturing PMI index as ‘truer’ overview of the China landscape.
However, with a survey size of approximately 430 managers for a country that houses a manufacturing force well into the hundreds of millions, it is also a gauge that has design floors and a sample size that should be questioned. The PMI read isn’t perfect either; therefore the reads should be taken together for a grey picture of China’s current position.
What is clear 2013, the year of the snake, is that China is taking steps to indeed slow down. With New Year celebrations seeing the country taking a full seven days off, it would not surprise me to see the official PMI index joining the HSBC PMI index, and fall into contraction for the first time in 14 months.
Every year China experiences big seasonality swings - the question for this year is; how much focus will this attract?
January 2014 was the worst start to a year since 2010 on the ASX. Emerging market risk coupled with the China slowdown story acted as a vice to squeeze the market lower, and continued the theme of the past four years of severe underperformance compared to its global peers.
The AUD and the ASX have always been seen as a proxy for the Chinese economy, even though Australia only exports around 35% of all exported goods to China, so watch for continued underperformance. If the China trade balance on a headline read shows further signs that exports are contracting (and it will because of Chinese New Year), the China bears will only get louder.
The same conclusions can be drawn for PMI, PPI, CPI and the most interesting piece of data for the start of the year - Q1 GDP. A slowdown in economic growth will only heighten fears of a credit crunch. If cash flow is slowing and debt is ‘ballooning’, credit worthiness will be questioned.
The year of the horse may see several hurdles in front of it, and could see regional markets under sustained pressure for the first four to five months of the year.
Ahead of the Australian open
With China and most Asian nations on holidays, intermittently over the next week, Australia will have to forge its own path. There is a plethora of data out, coupled with bottom-up news that will drive the market. The RBA will meet for the first time in 2014 tomorrow; expectations are for no change, however will it remove its easing bias? The trade balance will be released on Thursday coupled with December retail sales and then the RBA monetary policy Friday morning; all are key as to how the economy was performing over the key Christmas period.
Currently we are calling the market down 22 points on the 10am bell (AEDT) to 5168 - 0.4%, which is based on Saturday night’s close of the futures market. The US and European market were weaker on Friday and this will filter through trade this morning. With Asia enjoying its New Year festivities, trade volumes will also suffer.