China Stocks Drop On Downbeat Data; India Slides

Mainland Chinese stocks fell Wednesday after a gauge of the country’s manufacturing sector dropped to a 11-month low, while Indian shares after the country’s central bank further tightened its policies to support the rupee.

The Shanghai Composite  fell 0.5% as investors digested preliminary data released by HSBC, showing China’s manufacturing Purchasing Managers’ Index slid to 47.7 in July from a final reading of 48.2 in June. Hong Kong’s Hang Seng Index ended 0.2% higher.

Both benchmarks came off their lows amid expectations that policy makers were likely to step in to support the economy, after a state-owned media report earlier this week cited Premier Li Keqiang as saying that Beijing wouldn’t tolerate an economic growth of less than 7%.

“As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the flash PMI reinforces the need to introduce additional fine-tuning measures to stabilize growth,” said HSBC’s chief China economist Hongbin Qu, in a statement accompanying the PMI data release.

“Combined with the broad-based slowdown in economic activity in June, we expect more announcements from various government bodies in the coming weeks to support growth,” said Jian Chang, chief China economist at Barclays.

Shares of China Minsheng Banking Corp.  slid 2%, Jiangxi Copper Co. dropped 1.4% and Poly Real Estate Group Co.  skidded 3.1% in Shanghai.

Chinese property shares advanced in Hong Kong, with China Overseas Land & Investment Ltd.   rising 1.9% and China Resources Land Ltd.   climbing 1.7%.

Japan down, but Australia rises

Meanwhile, Japan’s Nikkei Stock Average  lost 0.3% after a two-day advance, and Taiwan’s Taiex  dropped 0.2%, while Australia’s S&P/ASX 200 and South Korea’s Kospi added 0.4% each.

India’s Sensex dropped 1.2% in Mumbai afternoon trading, a day after the Reserve Bank of India restricted banks’ access to a source of cheap funds, as part of its efforts to support the rupee.

Banks led the drop, with ICICI Bank Ltd.  sliding 3.9% and State Bank of India shedding 3.1%.

Sanjay Mathur, a strategist at the Royal Bank of Scotland, said the RBI’s move, together with New Delhi’s curbs on gold imports, will strengthen the rupee, but would also boost borrowing costs in the country, weighing on the economy.

“Our 5% growth estimate [for the current financial year ending March 31, 2014] may need to be revisited,” Mathur said.

A weaker rupee makes imports more expensive, with energy imports in particular adversely affecting India’s trade balance and boosting consumer prices in the country. The U.S. dollar has risen as much as 7.8% against the rupee so far this year.

Shares of several technology firms rose after Apple Inc. reported better-than-expected sales despite suffering a steep decline in quarterly profits.

Among Apple suppliers, shares of Rohm Co.  gained 5.5%, and Taiyo Yuden Co.  rose 1.5% in Tokyo, LG Display Co.  added 2.4% in Seoul, and Hon Hai Precision Industry Co.   climbed 1.4% in Taipei.

KDDI Corp. , which offers iPhone service plans to its customers in Japan, advanced 1.7% in Tokyo trade. Apple’s rival Samsung Electronics Co.  gained 0.6% in Seoul.

Analysts at Barclays sounded a cautious tone, however, saying the iPhone maker’s sales guidance for the fiscal fourth quarter was also weaker than market estimates.

“We believe Apple’s weaker margin trend might put more pricing pressure on its supply chain in Asia in the longer term, and we remain cautious on the Asia tech hardware universe,” Barclays wrote in a report.

Shares of Nippon Steel & Sumitomo Metal Corp.  lost 1% after the Nikkei newspaper reported many steel users were reluctant to an increase in prices that automobile giant Toyota Motor Corp. had already agreed to pay.

Shares of Toyota  fell 0.8% on a separate Nikkei report the company and Ford Motor Co.  have ditched plans to develop a hybrid system for light trucks and sport utility vehicles.

Meanwhile, official figures released earlier Wednesday showed Japan’s exports grew a weaker-than-expected 7.4% in June from the year-ago period.

Shares of Australian banks held their early gains after data showing consumer prices in the country rose a less-than-expected 0.4% in the second quarter from the preceding three months.

Commonwealth Bank of Australia advanced 0.7%, and Westpac Banking Corp.  gained 0.9%.

Source : Marketwatch