Clunk! That was the sound of stocks and commodities around Asia tumbling on the double-whammy of the US Fed’s well-documented gloom and, more unexpectedly, a further fall in Chinese manufacturing activity. The advance estimate of China’s September purchasing managers’ index put the measure at 49.4 from 49.9 in August. That is now three months below the 50 level that (roughly) denotes the difference between expansion and contraction. This is poor.
But investors’ tendency to draw a causal link between any negative Chinese data and virtually all growth assets, from raw materials to technology stocks, is overdone. The theory goes that if China’s manufacturing is slowing, its economy must be cooling more rapidly than thought and thus the one large bright spot in the world economy is dimming.
Layer on to that the growing references to the 2008 market turmoil that did indeed trigger a global economic collapse, including in China, and investors are frightened of a rerun. This is clear in the stock markets, where the Hang Seng has this year underperformed other China-tilted markets such as Australia and Korea and, off 18 per cent, even done slightly worse in common currency terms than the crisis-wracked FTSE Eurofirst 300.