Better China PMI data provides support for Asia markets

China’s purchasing managers’ index stood at 50.2 in October, 0.4 points better than in September, according to official data. This gave markets confidence that China’s economy is on a slow but steady growth. The data was largely welcomed by the Asian markets with the MSCI index of Asia-Pacific shares outside Japan moving up a marginal 0.2 percent, following overnight gains in European and U.S. stocks on optimistic U.S. employment and consumer confidence reports.

China’s central bank also conducted its largest-ever net fund injection this week to boost liquidity in the economy, supporting growth. The move showed the central bank is looking to keep loose monetary policies in order to support lending and spending ahead of the all-important power transition starting November 8.

Hong Kong shares hit a new 2012 day high, tracking an Asia-wide rally. The Hang Seng Index rose 1.1 percent to 22,076.4 on friday, further extending Thursday’s rally on Chinese economy optimism. The index is on track to record a fresh year-end high if it can close near these levels.

The Korea Composite Stock Price Index (KOSPI) also up ticked 1.11 percent at 1,919.52 points and teetering over the 1,900-mark. Technology stocks were amongst the biggest gainers supported by expectations that a booming market for mobile electric devices will lead to higher profit from sales of component parts. Samsung Electronics rose 2.2 percent and its industry peers LG Display and SK Hynix rose more than 2 percent respectively.

Japan’s Nikkei average saw an increase of 1.1 percent at the open underpinned by a weaker yen. This week, we also saw the bank of Japan taking additional easing measures on 29 October in a bid to help its economy overcome deflation. The stimulus monetary policy was also introduced with the concerns of the worsening situation and economic relations coming out of the conflict between China and Japan over the Senkaku islands. The dispute between China and Japan over a few small islands in the East China Sea has a direct impact on Japanese automakers selling vehicles in China.

Japan’s auto industry is “the pearl in the crown” of the nation’s economy. Earlier in the week Honda, whose China sales were down 40%, lowered its profit forecast, based on the consumer boycott of its vehicles. China remains a key market for auto sales as slowing demand from Europe and Japanese auto-makers such as Toyata, Nissan and Honda may have to look towards expansion in the likes of Russia, Brazil or even developing economies.