The Chinese market slowdown has reverberated across Asia, affecting Japan, South Korea, Australia, and Indonesia. This slowdown has been compounded by a slow manufacturing output that was reported this past week.
Asian markets have continued to slide. Australian stocks have hit a two year low. Australia counts China as its number one export market. Hearing the news that Chinese manufacturing fell this past month, the Australian market fell 2.1 percent. The All Ordinaries index fell 98 points. This factors onto a loss of 30 billion dollars in Australian markets.
China’s slump will have the largest impact on Australia’s market because of their close business ties. The ripple felt in Australia is caused by the large slump in China. Chinese markets have borne even more of a loss. This was after a slide in China’s manufacturing output likely caused by China’s overall slowdown in their economy, but is a tad surprising because China’s devaluation of the Yuan should have bolstered more exports.
The manufacturing activity of China slipped from 47.3 in August to 47.0 in September. A number above 50 indicates an expansion of manufacturing activity as compared to the previous month while a number below 50 means a retraction as compared to the previous month. Once this came out the markets reacted immediately. A market strategist was quoted as saying, “The weaker-than-expected reading reinforced concerns that the Chinese economy is struggling to shore up growth momentum.” This slump in Chinese markets was the fastest since the country was recovering from the economic downturn in March of 2009.
This comes at a time that the president of China, Xi Jinping, takes his first trip to the United States to assure business investing in China and to show that China is a superpower with strong economic growth potential. He is touting pushing forward with economic reform. In Seattle, Xi defended his government’s efforts to hold up the market, and that the Chinese market had reached a point of “self-recovery and self-adjustment.” Mr. Xi has his work cut out for him as many US investors view the government’s intervention in the Chinese market as over-reaching and worry about the independence of the Chinese markets. Mr. Xi’s assertions that China is on par with the U.S. is also called into question as the American economy remains strong while China’s growth is still slipping.
His statement is in stark contrast from the actual market data. The Shanghai market is down 39% from its June peak. Across Asia multiple other markets are feeling the China slowdown. This weak factory reporting data adds to a variety of factors and pressures affecting emerging market including the slowdown in global demand and the uncertainty of the interest rate in the U.S.
The slowdown in the world economy and the uncertainty in the Fed means that now more than ever it is important to have your investments in a company that understands the market and makes smart investments in American industries and real estate. At Cambridge Realty Capital we understand the importance of safe and secure investments.