By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Mainland Chinese stocks fell Wednesday after a gauge of the country’s manufacturing sector dropped to a 11-month low, while Indian shares dropped after the country’s central bank further tightened its policies to support the rupee.
The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP -2.12% fell 0.5% as investors digested preliminary data released by HSBC, showing China’s manufacturing Purchasing Managers’ Index slid to 47.7 in July from a final reading of 48.2 in June. Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -3.64% ended 0.2% higher.
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Both benchmarks came off their lows amid expectations that policy makers were likely to step in to support the economy, after a state-owned media report earlier this week cited Premier Li Keqiang as saying that Beijing wouldn’t tolerate an economic growth of less than 7%.
“As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the flash PMI reinforces the need to introduce additional fine-tuning measures to stabilize growth,” said HSBC’s chief China economist Hongbin Qu, in a statement accompanying the PMI data release.
“Combined with the broad-based slowdown in economic activity in June, we expect more announcements from various government bodies in the coming weeks to support growth,” said Jian Chang, chief China economist at Barclays.
Shares of China Minsheng Banking Corp. /zigman2/quotes/203910009/delayed CN:600016 -1.33% /zigman2/quotes/200749234/composite CMAKY +3.10% slid 2%, Jiangxi Copper Co. /zigman2/quotes/201334192/delayed CN:600362 -2.11% /zigman2/quotes/204256025/composite JIXAY +31.60% dropped 1.4% and Poly Real Estate Group Co. /zigman2/quotes/201864015/delayed CN:600048 -3.30% skidded 3.1% in Shanghai.
Chinese property shares advanced in Hong Kong, with China Overseas Land & Investment Ltd. /zigman2/quotes/205731176/delayed HK:688 -2.29% /zigman2/quotes/202573805/composite CAOVY +3.28% rising 1.9% and China Resources Land Ltd. /zigman2/quotes/202417326/delayed HK:1109 +0.55% /zigman2/quotes/201656413/composite CRBJF -100.00% climbing 1.7%.
Japan down, but Australia rises
Meanwhile, Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -3.99% lost 0.3% after a two-day advance, and Taiwan’s Taiex dropped 0.2%, while Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -2.35% and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -2.80% added 0.4% each.
/zigman2/quotes/210562010/realtime/sampled USDINR 73.9371, 0.0000, 0.0000%
India’s Sensex /zigman2/quotes/210597966/delayed IN:1 -3.80% dropped 1.2% in Mumbai afternoon trading, a day after the Reserve Bank of India restricted banks’ access to a source of cheap funds, as part of its efforts to support the rupee.
Banks led the drop, with ICICI Bank Ltd. /zigman2/quotes/204318043/delayed IN:532174 -4.83% /zigman2/quotes/208917098/composite IBN -3.26% sliding 3.9% and State Bank of India /zigman2/quotes/206945693/delayed IN:500112 -4.19% shedding 3.1%.
Sanjay Mathur, a strategist at the Royal Bank of Scotland, said the RBI’s move, together with New Delhi’s curbs on gold imports, will strengthen the rupee, but would also boost borrowing costs in the country, weighing on the economy.
“Our 5% growth estimate [for the current financial year ending March 31, 2014] may need to be revisited,” Mathur said.
A weaker rupee makes imports more expensive, with energy imports in particular adversely affecting India’s trade balance and boosting consumer prices in the country. The U.S. dollar has risen as much as 7.8% against the rupee so far this year.