[ad_1]
* Chinese PMI Caixin shows marginal growth
* The activity is slowing down in South Korea, Indonesia; contracts in Malaysia
* Figures show the growing impact of the US-China trade conflict.
* Prices for containers and bulk products are falling: tmsnrt.rs/2PiHmFk
* Outlook darker as more, higher rates on cards (Adds graphic)
By Marius Zaharia
HONG KONG, November 1 (Reuters) – The economic impact of the intensification of the trade war between Washington and Beijing appears to have worsened last month with the contraction in factory activity and export orders in Asia, but analysts warned that the worst was yet to come.
As conditions for exporters and factories deteriorated, manufacturing surveys showed marginal growth in China, a slowdown in South Korea and Indonesia, and a contraction of activity in Malaysia and Taiwan.
These figures follow weaker-than-expected industrial output data from Japan and South Korea on Wednesday, as production in the latter country recorded the largest contraction in a year and a half.
On the other hand, the US manufacturing survey ISM for October, scheduled for Thursday, was expected to grow at a much faster pace than Asia, but slightly slower than in September, reinforcing the prospects for further rate hikes. of the Federal Reserve.
Worryingly, US rate hike prospects could pose new market challenges for vulnerable economies in the region – Indonesia, India, and the Philippines – which have already been forced to raise rates to mitigate the massive sales of currencies, stocks and bonds.
"Monetary conditions are tightening around the world, slowing Chinese demand and turbulence in financial markets are affecting investment and confidence decisions," said Senior Economist Asia Asia's Aidan Yao. at AXA Investment Managers.
Yao said many orders from abroad are still being delivered in anticipation of new tariffs and that the impact is still mostly indirect, via the channel of business confidence.
"The real economic shock is coming," he said.
The Chinese manufacturing sector barely made progress last month after stagnating in September and export orders contracted further, according to a report from the private manufacturing sector. An official survey conducted on Wednesday showed that the manufacturing sector experienced the smallest expansion in two years, penalized by the slowdown in demand both inside and inside the country.
Japan has shown greater resilience and activity has resumed, but at a slower pace than in a previous flash estimate. The world's third-largest economy is facing pressure in other parts of the world as the central bank cuts inflation expectations on Wednesday, easing external risks.
Its specialist technology neighbor and the economies of Southeast Asia seem however more exposed.
A DBS analysis of Asian supply chains for products destined for the United States shows the strongest exposures in electrical machinery and equipment in South Korea, Singapore, Malaysia, the Philippines and Taiwan.
South Korea also exposed its exports of minerals and petrochemicals, as well as the Indonesian transport sector, according to the DBS report, which examined the correlation between Chinese imports from Asia and its US exports.
The Harpex index, CHT-IDX-HARPX, which tracks weekly changes in container shipping rates and is a measure of global shipping activity, is now down 25 % since its June summit.
China's slowdown
The pressure on the Chinese economy is not only external. Economic growth slowed at its weakest quarter-on-quarter pace since the global financial crisis, to 6.5 percent, reflecting sluggish domestic demand by Chinese standards.
Things can get worse.
Washington has already imposed tariffs on Chinese goods worth $ 250 billion and China has responded by imposing duties on US goods worth $ 110 billion, prompted by the demands of the President American Donald Trump to radically change China's intellectual property, industrial subsidies and trade policies.
But in the absence of any agreement between Trump and Chinese leader Xi Jinping, who is expected to attend the G20 summit this month in Buenos Aires, the 10% recently introduced tariffs on $ 200 billion worth of goods Chinese will be increased to 25% and other duties could be applied on the remaining $ 250 billion of Chinese products that have escaped early rounds.
"As everyone expects a new rate hike, there is still a lot to do. After January 1, we anticipate a collapse of many commercial and economic activities, "said Kevin Lai, Senior Economist at Daiwa Capital Markets.
All this bodes ill for the Asian financial markets, with many currencies and stock markets in the region deep in the red this year. Economies with large current account deficits have been particularly vulnerable to capital flight.
The rate hikes that central banks have deployed to stop rapid declines in their currencies could also further slow down activity.
"I would argue that it would be wise to remain wary of emerging market currencies in trade talks in a few weeks and instead rely on the US dollar," said APAC strategist Michael Every, Rabobank.
OUTLIERS
Indian manufacturers, who are more dependent on domestic demand, exceeded expectations of slower growth in October and experienced the strongest growth in four months.
Vietnam was another notable economy in the region, showing an acceleration of manufacturing activity in October. The country's labor base is still cheap by regional standards, while its commercial ties with the United States still have nothing to do with the type of conflict with which its largest Asian peers debate.
As such, it is perceived as a potential winner of the Sino-US trade war, as companies plan to change their bases and reorient their supply chains to avoid cross-fire between the two largest economies in the world. .
"Vietnam, according to our estimates, is the least affected country in Asia … because if global companies have to relocate, Vietnam is a viable option," said Yao of AXA.
"But it will take a long time in Vietnam to acquire some of the market share left by China."
Report by Marius Zaharia; Edited by Sam Holmes
Source link
