Deteriorating Asian economic data on Monday took the shine off the Bank of Japan’s unexpected easing on Friday, sending investors across the region scurrying for safe havens. This situation can be interfered by looking manufacturing drops in China and Korea's biggest plunge in exports since August 2009.
(A man carries boxes at a market in Seoul on Feb. 1, 2016. South Korea's exports, the main driver of the national economy, suffered their sharpest drop since August 2009. ILLUSTRATION: AGENCE FRANCE-PRESSE/GETTY IMAGES)
China’s official manufacturing purchasing managers index gauge fell to 49.4 from 49.7 in December, hitting the lowest level since August 2012. An equivalent measure from Markit also registered contraction, albeit rising slightly to 48.4 from 48.2.
The weakness was mirrored in gauges from Taiwan and South Korea, while Japanese manufacturers registered a slower pace of expansion. The official Chinese non-manufacturing gauge appeared to fare better, with official gauges showing the sector expanding, but the measure still slipped to 53.5 from 54.4.
Even though reading the Chinese economy at this time of year is complicated by the timing of the Lunar New Year distorting the data, analysts are pessimistic about the prospects for the months ahead, too. The country’s manufacturing sector “will likely face a tough year ahead on the back of overcapacity, weakening global demand, and [the] government’s plans to tackle pollution,” analysts from ANZ wrote in a research report.
The downturn in manufacturing activity was mirrored in a bigger-than-expected plunge in South Korean exports, which typically act as a bellwether for global trade. Shipments fell by 18.5% year-on-year in January, the biggest drop since August 2009.
Investors are still reacting to the Bank of Japan’s surprise move to introduce negative interest rates on Friday for the first time, which has pushed the yield on Japanese 10-year government bonds to record lows of just 5.11 basis points. U.S. Treasury 10-year yields also hit a nine-month low of 1.92%.
Japanese domestic investors “have little choice” but to look beyond Japanese government bonds because of their paltry yields and “diversify into suitable alternatives, in particular US Treasuries, which is essentially a high-yielding market,” analysts from HSBC wrote.
Meanwhile, the prospect of further easing from central banks and a stumbling global economy is lifting the price of gold in Asian trading.
It has made for a mixed day for equity investors in the region, with Japan’s markets faring best. Stocks in China and Hong Kong have extended last month’s selloff.
Source : The Wall Street Journal
China’s official manufacturing purchasing managers index gauge fell to 49.4 from 49.7 in December, hitting the lowest level since August 2012. An equivalent measure from Markit also registered contraction, albeit rising slightly to 48.4 from 48.2.
The weakness was mirrored in gauges from Taiwan and South Korea, while Japanese manufacturers registered a slower pace of expansion. The official Chinese non-manufacturing gauge appeared to fare better, with official gauges showing the sector expanding, but the measure still slipped to 53.5 from 54.4.
Even though reading the Chinese economy at this time of year is complicated by the timing of the Lunar New Year distorting the data, analysts are pessimistic about the prospects for the months ahead, too. The country’s manufacturing sector “will likely face a tough year ahead on the back of overcapacity, weakening global demand, and [the] government’s plans to tackle pollution,” analysts from ANZ wrote in a research report.
The downturn in manufacturing activity was mirrored in a bigger-than-expected plunge in South Korean exports, which typically act as a bellwether for global trade. Shipments fell by 18.5% year-on-year in January, the biggest drop since August 2009.
Investors are still reacting to the Bank of Japan’s surprise move to introduce negative interest rates on Friday for the first time, which has pushed the yield on Japanese 10-year government bonds to record lows of just 5.11 basis points. U.S. Treasury 10-year yields also hit a nine-month low of 1.92%.
Japanese domestic investors “have little choice” but to look beyond Japanese government bonds because of their paltry yields and “diversify into suitable alternatives, in particular US Treasuries, which is essentially a high-yielding market,” analysts from HSBC wrote.
Meanwhile, the prospect of further easing from central banks and a stumbling global economy is lifting the price of gold in Asian trading.
It has made for a mixed day for equity investors in the region, with Japan’s markets faring best. Stocks in China and Hong Kong have extended last month’s selloff.
Source : The Wall Street Journal
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