On Tuesday, Asian shares gained with sentiments boosted by better-than-expected Caixin manufacturing PMI July figures. Japan’s benchmark Nikkei 225 index increased 0.22%, while South Korea’s Kospi was up 1.02%, led by a bounce in manufacturing stocks. Market movers included Samsung Heavy soaring 4.46% and Lotte Chemical gained 3.25%.
In Australia, the S&P/ASX 200 added 0.77%, motivated by the strength in its energy sub-index, which increased 1.9%. The Reserve Bank of Australia held interest rates stable at record low 1.5% as expected on Tuesday, suggesting the possible impact of a stronger Australian dollar.
Moreover, Hong Kong’s Seng Index advanced 0.73%. The Shanghai Composite was up 0.41%, but off its session highs, and the Shenzhen Composite increased 0.064%.
China’s Caixin Manufacturing PMI Hits 4-month High
The Caixin China manufacturing PMI for July came in at the four-month high of 51.1, surpassing an analyst’s expectation of 50.4.
In June, the Caixin manufacturing PMI came in at 50.4, higher than May’s 49.6, which was an 11-month low.
“Panelists widely commented on an improvement in market conditions and strong foreign demand. Notably, new export sales increased at the second-fastest rate since September 2014,” based on the media released.
Any levels above 50 indicate an expansion, while levels below 50 denote contraction.
Caixin’s survey tracks small and medium-sized enterprises instead of the large firms and state-owned businesses on which the official gauge concentrates.
An independent economist, Andy Xie, said that he revival in the commodities sector has contributed to improvements seen in the private sector, but is unlikely to be a long-term trend.
“Most private companies are still struggling. This round of recovery was based on government sector spending last year and I don’t think that’s going to last with the crackdown on financial leverage,” Xie added.
On Monday, the CFLP manufacturing PMI touched 51.4, a trade below expected, but still in expansion, while 54.5 for the services PMI was also seen as stable.
China reported second-quarter GDP growth of 6.9% that topped expectations, but market watchers are anticipating the economy to slow in the second half of 2017, as government measures to harness in a hot property market and rising corporate debt start to weigh more on business sentiment and economic activity.
“Operating conditions in the manufacturing sector improved further in July, suggesting the economy’s growth momentum will be sustained,” Zhengsheng Zhong, an economist at CEBM Group, said in a statement accompanying Tuesday’s release. “That said, it’s unlikely that financial regulatory tightening will be relaxed.”
On Monday, Wall Street closed at record highs, as market participants continued to expect positive corporate earnings would reinforce a move higher in market averages offsetting the previous fall in tech stocks.
U.S. stocks showed a mixed start to the week, as sentiment on corporate’s earnings were still bullish, after data released on Friday showed 73% of the S&P 500 companies that had reported earnings as of last week, topped estimates on both the top and bottom lines.
However, some analysts noted that the recent bull run in the main U.S. indexes could come under pressure, as corporate earnings in the second half of the year may struggle to match the expectations.
“We’re probably seeing peak earnings, said Ed Keon, managing director and portfolio manager at QMA, a multi-asset manager in Newark, New Jersey. “I think we’ll be a little slower in the second half.
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