Weak Manufacturing Data - the Reason Behind Chinas Stock Slump

Published Date : Sep 14, 2015

China’s stock reached its lowest in the last three weeks on Monday, after lukewarm report over the weekend suggesting that the second largest economy in the world is slowing. 

The index at Shanghai Composite dropped more than 4 per cent when trading pulled back to close down at 2.7 per cent lower than its previous data. Likewise, more tech focused Shenzhen Composite’s stock plummeted by 6.7 per cent by closing. 

According to the latest retail data, sales in China rose by 10.8 per cent year-on-year basis on August, from 10.5 per cent growth registered in July. However, this could not cheer investors since industrial output disappointed the expectations, growing at 6.1 per cent, as against the expected 6.4 per cent. 

This declining number is attributed to the drop in car sales, and reduced imports in China, which also triggered the fears of an economic slowdown. 

European investors tried resisting the panic, however, FTSE 100 opening at 0.75 per cent gave a sign that investors were reluctant to jump on China woes post Black Monday witnessed on 24th August, when jeopardy in Chinese stocks knocked off trillions from the equity markets globally. 

The recent slump in the Chinese economy however, could not dampen the spirits of Premier Li Keqiang who remained defiant that his expectations of a 7 per cent growth rate for the country is achievable. The recent data obtained from Chinese stock markets outline the steep economic downturn. Moreover, there are also fears about the fact that the Chinese data in actuality is much weaker than what is disclosed by the official statistics illustrates. 

According to reports, the government in China has already revised its growth figures from 7.4 per cent to 7.3 per cent, which by far is the weakest in decades.