China's Manufacturing Shrinks, Stimulus, Please! Barron's Blog

        By Shuli Ren
        China's manufacturing sector contracted this month, flash PMI data from HSBC shows.
        The PMI came in at 49.5, below 49.8 expected by the street. A reading below 50 signals contraction.
        In a research note published before the PMI release, UBS strategist Li Chen said China's central bank may inject more liquidity into the economy as soon as this week. His reasoning? The 500 billion yuan medium-term lending facility issued in September is due to expire this week. "There is a need for policy support in order for liquidity to remain stable before the Chinese New Year."
        Beijing is also using fiscal stimulus packages. Reuters reported yesterday that China approved $18 billion worth of new road projects. Bloomberg today said the city of Beijing is going to build a new airport worth $19 billion.
        Hong Kong-listed equities fell along with the rest of Asia. The Hang Seng Index was down 1.1%. Hang Seng China Enterprises Index fell 1.2%. Energy names led the loss. CNOOC ( 0883.HK/ CEO) slumped 3.2% and PetroChina ( 0857.HK/ PTR) dropped 2.6%.
        But the Shanghai market rose, with the Composite Index up 0.8% recently. A-share's outperformance continues this week on expectations of further monetary and fiscal easing. On Monday in New York, the Deutsche X-Trackers Harvest CSI 300 China A-Shares Fund ( ASHR) rose 0.4%, while the iShares China Large-Cap ETF ( FXI) fell 0.3%. The Market Vectors China ETF ( PEK), which also tracks A-Share stocks, gained 0.6%.
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        (END) Dow Jones Newswires

        December 15, 2014 21:39 ET (02:39 GMT)

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