Weak PMI weighs on stocks
By Feng Jianmin |
July 22, 2011, Friday
|
Print Edition
Print Edition
SHANGHAI'S key stock index yesterday fell for the fourth straight day, the longest losing streak in a month, after data showed China's manufacturing in July may have contracted for the first time in a year.
The benchmark Shanghai Composite Index lost 1 percent to 2,765.89 points, the biggest decline since July 12.
Preliminary purchasing managers' index data released by HSBC Holdings Plc and Markit Economics indicated that the gauge fell to 48.9 in July from June's 50.1. A reading below 50 indicates contraction.
The final July PMI reading is due on August 1.
"This implies that June's rebound in industrial production was just temporary," said Qu Hongbin, chief economist for China at HSBC, in a statement.
"We expect industrial growth to decelerate in the coming months as tightening measures continue to filter through," he said.
But Qu also said that China economic growth could still be sustained by consumption and investment in infrastructure projects. His view was partly echoed by stock analysts.
"Upstream suppliers are more likely to suffer from the pressure to reduce inventory, while profits for industrial companies closer to the consumer's end will improve," the research team of Huatai Securities led by senior analyst Mu Qiguo wrote in a report.
The team recommended consumption-related share purchases such as auto makers, property, and electrical appliances.
Metal producers dropped on concerns that demand may fall because of retarded manufacturing activity. Jiangxi Copper Co shed 2.8 percent to 35.73 yuan.
Meanwhile, liquidity continues to be tight and the benchmark money rate rose for the fifth consecutive day to 5.77 percent yesterday.
Banks were weak. China Merchants Bank lost 0.9 percent to 12.63 yuan, while the Agricultural Bank of China fell 0.4 percent to 2.71 yuan.
The benchmark Shanghai Composite Index lost 1 percent to 2,765.89 points, the biggest decline since July 12.
Preliminary purchasing managers' index data released by HSBC Holdings Plc and Markit Economics indicated that the gauge fell to 48.9 in July from June's 50.1. A reading below 50 indicates contraction.
The final July PMI reading is due on August 1.
"This implies that June's rebound in industrial production was just temporary," said Qu Hongbin, chief economist for China at HSBC, in a statement.
"We expect industrial growth to decelerate in the coming months as tightening measures continue to filter through," he said.
But Qu also said that China economic growth could still be sustained by consumption and investment in infrastructure projects. His view was partly echoed by stock analysts.
"Upstream suppliers are more likely to suffer from the pressure to reduce inventory, while profits for industrial companies closer to the consumer's end will improve," the research team of Huatai Securities led by senior analyst Mu Qiguo wrote in a report.
The team recommended consumption-related share purchases such as auto makers, property, and electrical appliances.
Metal producers dropped on concerns that demand may fall because of retarded manufacturing activity. Jiangxi Copper Co shed 2.8 percent to 35.73 yuan.
Meanwhile, liquidity continues to be tight and the benchmark money rate rose for the fifth consecutive day to 5.77 percent yesterday.
Banks were weak. China Merchants Bank lost 0.9 percent to 12.63 yuan, while the Agricultural Bank of China fell 0.4 percent to 2.71 yuan.
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