Asian markets closed the week on the lower note as the commodity sell off remained in focus. The precious metal has traded as low as 1095 during the early Asian trading session. Nonetheless, the price of oil has shown some sign of life and it has bounced back up from its low. Most of the negative sentiment was filtered from the U.S. markets where the indices are closed in a negative territory once again recording over half a percent sell off. Although, commodity prices were also in focus there, but at the same time more selling pressure or negative sentiment filtered from the disappointing earnings of the big players; caterpillar and 3M.
The Chinese index, the Shanghai composite index was still able to push a little bit higher despite the heartbreaking economic data which was released overnight in China. The preliminary Chinese PMI dropped to 48.2 which was far less as compared to the forecast of 49.7. The reading of 50 differentiates between contraction and expansion, which means anything above 50 will show expansion and vice versa.
Most of the market pundits have read this number as a positive sign because this will force the Chinese central bank to print more money to boost the growth. However, playing this game in the past or at least at the start, had excellent effects on the economy, but for now, I believe someone needs to sit down and think of a new strategy as this one is certainly running out of its course.
The difference is vast between the Chinese A share market, which is manipulated by the Chinese government, and the Hong Kong market, which is a true market. In Chinese A Share market, the Chinese government has been buying the shares to show the world that this market has become more stable and the Chinese economic data news was taken as a “bad news is a good news”. But in Hong Kong, the Chinese economic data were taken as a bad news and investors sold their positions on the back of this.