China manufacturing gauge edges higher, Aussie dollar follows


By business reporter Michael Janda

A small bounce in a widely-watched Chinese manufacturing index has edged the Australian dollar higher.

HSBC’s flash manufacturing purchasing managers’ index (PMI) rose to 50.5 in September from a final reading of 50.2 in August.

The so-called flash index is a fairly large sample of the final survey, the results of which will be released next week.

Economists had been expecting the index to fall slightly to 50 points, which is the level that separates expansion from contraction – the further above 50 points the index is, the stronger the expansion.

In response to the better-than-expected result, the Australian dollar rose from 88.78 to 88.93 US cents just after the data was released at 11:45am (AEST).

The Australian share market has also edged back into positive territory after a weak start this morning, and following heavy falls yesterday.

The All Ordinaries index was 0.1 per cent higher at 5,373 by 12:22pm.

TD Securities head of Asia-Pacific research Annette Beacher says today’s PMI number has been enough to offset the worst fears of an economic hard landing in China, at least for now.

“It was a risk-off day yesterday as the Chinese finance minister (at the G20) ruled out further stimulus/policy shifts in response to ‘one economic number’,” Ms Beacher explained in a note on the data.

“Given that message was delivered in an otherwise quiet session it garnered far more weight than it should, sending iron ore below $US80/tonne, Asia-Pacific bourses tumbling, and the Australian dollar overnight sunk to $US0.885.

“After yesterday, this upside surprise to the HSBC print could see Asia-Pacific stocks recover lost ground, led by SHCOMP (the Shanghai Composite Index), boosting the Australian dollar further.”

However, the index did not contain solely good news, with the employment sub-index at a five-and-a-half year low of 46.9, indicating that Chinese manufacturers are more likely to be laying off staff than taking them on.



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