By  on May 23, 2013

Asian shares lost ground Thursday as discouraging macroeconomic data emerged out of China.

HSBC's Chinese purchasing managers' index for May slipped below the critical threshold mark of 50, indicating a contraction for the first time since October.

Tokyo's Nikkei 225 was the hardest hit of the Asian exchanges. It tumbled 7.3 percent to end the day at 14,483. Retailers were among the hardest hit shares, with Isetan Mitsukoshi shedding 9.8 percent to close at 1,352 yen, or $13.14, and Fast Retailing losing 8 percent to end the day at 38,100 yen, or $370.43.

In afternoon trade, Hong Kong's Hang Seng was losing 2.5 percent while the Shanghai Composite was down 1.2 percent and Singapore's Straits Times was shedding 1.8 percent.

China's manufacturing activity contracted in May amidst slowing domestic demand and a decline in export orders from ailing economies overseas, according to the HSBC survey.

The country's purchasing manager's index, or PMI, fell to a seven-month low of 49.6 from 50.4 in April, HSBC said. Numbers below 50 on the 100-point scale indicate contraction. The survey said that employment fell at a faster rate and manufacturers' backlog of work decreased.

"The cooling manufacturing activities in May reflected slow domestic demand an ongoing external headwinds, said Qu Hongbin, HSBC's chief economist for greater China, adding that a sequential slowdown is likely in the middle of the second quarter, "casting downside risk to China's fragile growth recovery."

Qu said that weaknesses in China's labor market will require more policy report from the Chinese government.

During a speech on May 13, Chinese Premier Li Keqiang said there is little room to rely on stimulus policies and government direct investment.

"If there is too much reliance on government-led investment and policy driven to stimulate growth, this is not only unsustainable, but may also create new problems and risks," Li said, according to a transcript of the speech posted on the central government's website.

Beijing has set a growth target of 7.5 percent for the country's economy in 2013.

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