In Asia, the Chinese economic health has a lot of influence. If the Chinese economy is looking up, Asian stock markets usually rally. In fact, China is the epicenter, for the most part, of much of the market action on the west side of the Pacific.
It is worth noting that American and European investors have a lot to worry about due to Asian market performance. Thanks to an unexpected decrease in China’s factory sector, the Asian markets got spooked. How bad was the shrinkage in China’s manufacturing sector? It was really bad. We’re talking about a contraction that fell below the psychologically important 50.0 Purchasing Managers Index. The last time this has happened was two and a half years ago.
Maybe if this piece of news was the only bad news coming out of China, the Asian markets would have taken it in stride. Unfortunately, this piece of bad news came right after several bad indications that the Chinese economy is slowing down. While we can argue about the accuracy of Chinese government
economic figures, the official rate of growth for the Chinese economy has slowed to its lowest level in over twenty years. Add to this the reports coming out of China of a possible crash in its housing market, and you can see why Asian investors are spooked. All things being equal, unless there is some very positive offsetting news, this can’t help but weigh down US and European markets for quite some time.
