Chinese PMI Feeds Growth Fears (FXI, CNY, CYB)
Tim Seymour: News that a key gauge of the Chinese manufacturing economy has slid to its lowest level in nine months is feeding traders’ concerns about global growth.
The official Purchasing Managers Index from Beijing came in at 52 in May. This represents a significant downswing from a reading of 52.9 in April, but also showed that Chinese industry is still a bit more robust than economists had led traders to expect — consensus forecast was for 51.6.
Any reading above 50 indicates accelerating manufacturing activity, so Chinese factories are still ramping up, albeit at a slower rate of increase than previously.
Stocks in Shanghai edged up while their counterparts in Hong Kong edged down on the news. The prices of copper and other key industrial commodities remained firm.
Given these trends, look to China funds like the iShares FTSE China 25 Index ETF (NYSE:FXI) to trade relatively steadily this morning, although there could always be surprises:
The deceleration has been widely attributed to Beijing’s efforts to rein in lending and otherwise slow capital flows feeding inflation in China. In that respect, the campaign definitely seems to be working.
However, it may also be a secular slowdown. German PMI numbers are also at their lowest since October and manufacturing activity is now slower than it has been since 2009.
In that event, there may still be room for the yuan to rise relative to the euro and other currencies. It is stronger against the dollar today, which should push Market Vectors Chinese Renminbi/USD ETN (NYSE:CNY) and WisdomTree Dreyfus Chinese Yuan (NYSE:CYB) upward.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.