China’s Manufacturing Slump Deepens

From the Wall Street Journal,

The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, fell to a nine-month low of 47.8 in August, compared with a final reading of 49.3 in July, HSBC Holdings PLC said Thursday.

The fall could stoke market concerns over a sharp slowdown in the world's second-largest economy.

A reading below 50 indicates contraction from the previous month, while one above 50 indicates growth.

The preliminary August reading marks the 10th straight month the index has been in contractionary territory, signaling extended difficulty for manufacturers.

The sustained and deepening slump of China’s manufacturing activities appears to chime with the record amount of cash unleashed by China’s central bank the PBoC a few days back in the economy, and of the recent spate of hot money outflows.

The mainstream’s expectations of a benign slowdown or a soft landing seem to be turning into a hard landing (bubble bust)

The above developments has also been reflected on the financial marketplace as China’s main equity bellwether, the Shanghai index, continues to plumb new lows in slomo fashion.

Yet if conditions continue to deteriorate, where fear eventually dominates, slomo can turn into a stampede. And given the interconnectedness of China's economy and markets to the world, any major downside volatility is likely to enhance the transmission of contagion.

Be careful out there.