Asia stocks under pressure, China PMI in focus

Stocks across most of the region are extending the global sell off, with investor sentiment weighed down by poor European macro data and the International Monetary Fund’s cut on its global growth outlook.

China flags
Source: Bloomberg

Markets in China resume today after a long Golden Week holiday. In focus is this morning’s release of the HSBC China Services PMI and HSBC China Composite PMI.

Any positive news will be a welcome relief for investors, amid the relative lack of other indicators today.

The IMF trimmed its forecast for the global economy to grow at 3.8% in 2015, compared to its July forecast of 4%.

This comes less than a week after the World Bank pared down its growth outlook, including a cut to its forecast for China to grow at 7.4% this year, instead of 7.6%.

Those in the optimistic camp will be hoping for the HSBC China Services PMI to beat the August reading of 54.1 – an 18-month high. However, that will be unlikely following the recent stream of lacklustre macro data prints suggesting credit growth and the economy is losing steam.

A poor reading that hovers on the 50 point border separating expansion and contraction, or worse, could be a catalyst for further downside in the interim.

Ahead of the Hong Kong open

After seeing a bounce yesterday, we are calling for the Hang Seng Index or Hong Kong HS50 to open 0.8% lower, at 23,204 points.

While pro-democracy protests appear to be tapering, we’re seeing investor jitters return with concerns rising over global growth and valuations of stocks. This is likely to put pressure on Hong Kong stocks today.

However, there is an upside on the longer-term basis. We are seeing the Hang Seng Index respect its uptrend line and should see it edge higher to test the resistance level of 23,650 points.

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