China PMI takes a U turn

The HSBC China Flash PMI missed analysts’ estimates yesterday and fell to a six-month low of 49.6. Investors in Asia didn’t digest it too kindly as it was the first contraction after five consecutive months of expansion. The Flash PMI conflicted with the GDP growth announced over the weekend showing 7.7% versus expectations of 7.6%. It was rather sobering as this came at a time when hopes over a pickup in economic growth were beginning to rise. The MSCI Asia Pacific index fell 0.9% and the Hang Seng futures dropped 1.5% day on day while the China A50 futures slid 0.9%.

Big fall in Hong Kong equities before CNY
Yesterday’s fall in the HSI was the biggest drop since 3 Jan with volumes 33% more than the 30-day average. Out of the 50 members in the index, only four ended positive yesterday. Hang Lung Properties led the decline with a 5.1% slide. This came after the company said that its 2013 underlying profit slid 18%.
 
Hong Kong property prices highest in the world
Property prices in Hong Kong have been soaring the past few years as the city gains the title of the ‘most unaffordable’ housing in the world. This is the fourth consecutive year that the city is ranked World No. 1. According to a survey done by US-based consultancy Demographia, Hong Kong’s median home prices were more than HK$4.02 million, grossly above the annual median household income of HK$270,000.
 
Polytechnic University real estate professor Eddie Hui Chi-man said that “it is impossible for the salary income to catch up” and that since housing supply will not increase significantly in the near future, he believes that the housing problem will remain serious over the next two years. (South China Morning Post)

Source: Macquarie Research - 24 Jan 2014