On the macroeconomic front, the HSBC Flash China Manufacturing Purchasing Managers’ Index edged up to 49.8 in August from 49.3 in July, suggesting manufacturing activities in China improved slightly (despite the fact that a reading below 50 indicates a contraction).
For the interim results, most companies reported satisfactory reports apart from Shipping, amid tough industry conditions. Internet, telecoms, and selected industrials, reported better than expected reports and strong Consumer Discretionary results showed that consumer spending in China is still strong. Our portfolio remained largely unchanged this week.
Hong Kong inflation hit a new high at 7.9 percent year-on-year in July (the highest since 1995) although below the 8.2 percent level expected by the market. The significant rise was due to the government’s one-off relief on public housing rentals in July last year.
In India, the corporate earnings season is approaching the end but overall the results have been disappointing, especially overall margins and profitability, albeit top-of-the-line revenue was not an issue. Rising interest rates reflected on corporate results clearly with rising interest costs.
Cost pressures, in terms of rising commodity prices, are clearly visible across sectors like autos, engineering and fast moving consumer goods (FMCG) stocks, where margins have been under pressure.
Among banks, private sector units have been able to maintain asset quality despite a slowdown in growth. The risks that the European debt crisis may spread to Italy and Spain, and the U.S. downgrade haven’t sat down well with investors.
The last two weeks have been characterized by rising uncertainties related to the pace of growth in U.S. and European economies along with the sovereign debt ceiling debate. GDP forecasts are likely to be modestly reduced, with analysts adjusting to a scenario of sub-4 percent growth in 2011. Easing inflation expectations will boost rate sensitive sectors at the margin.
This report was provided by Mirae Asset Finance Group.