Asian shares fell Monday, as a measure of China’s factory activity hit a two-year low and investors continue to seek clarity about Beijing’s role in rescuing the stock market.
The Shanghai Composite ended 1.1% lower at 3622.91, after falling as much as 3% earlier Monday. The smaller Shenzhen Composite closed down 2.7% at 2053.12 and the small-cap ChiNext Price Index fell 5.5% at 2399.27.
Hong Kong’s Hang Seng Index fell 0.9%, while a gauge of Chinese companies listed in the city fell 1.1%.
Earlier Monday, a gauge of China’s factory-floor activity fell to a two-year low, adding to worries about the country’s struggling stocks, sluggish property market and weak demand at home and abroad.
The weak data also comes amid faltering faith in Beijing’s commitment to keep supporting the market, which remains roughly 30% from its mid-June peak. Shanghai is about 117 points, or 3%, from breaching its recent bottom on July 8, the worst of its recent selling.
“The regulator has to send a clear signal to the market regarding its commitment to stabilizing the market, rather than leaving investors guessing its next move,” said Tang Yonggang, an analyst at Shenwan Hongyuan Securities.
Chinese regulators don’t disclose details on how they support the market, although traders have said that government-funds have been coming in daily in recent sessions with large buy orders, including of blue-chip stocks. Several stocks in military defense and aviation, which helped boost the market last week, hit the 10% downward limit set by regulators on the Shanghai index Monday. But gains in banks and insurance stocks helped the index pare earlier losses.
The disappointing economic data also gives ballast to the case for more monetary easing in the second half of the year, said Nomura analyst Wendy Chen, adding that the central bank is very likely to lower the amount of reserves banks are required to hold again in August.
The Caixin China manufacturing purchasing managers index fell to 47.8 in July, compared with 49.4 in June. A reading below the 50-level indicates contraction. The final reading was lower than the Caixin preliminary July PMI of 48.2 and the official manufacturing PMI, released Saturday.
The reading follows comments over the weekend by central bank official Sheng Songcheng about his darkening economic outlook for the second half of the year, according to the state-run Securities Times newspaper.
“Investors are anticipating further policy support, given sluggish economic outlook in the second half this year,” said Li Lei, an analyst at China Minzu Securities, who expects stronger stabilization measures from Beijing if the Shanghai market slides below 3500 this week.
The latest measures by Chinese regulators to stem selling include an investigation into suspicious activity of trading on the mainland. China’s securities regulator said Friday that it has launched a probe into automated trading and has restricted 34 stock accounts suspected of influencing stock prices as of Monday. The government didn’t name any of the parties behind the restricted stock accounts, but U.S.-based hedge fund Citadel LLC said trading in one of the accounts it manages in China has been suspended.
Worries about slowing demand from China, a glut of supply and a stronger U.S. dollar continues to batter commodities markets. Many commodities are priced in the dollar, so a stronger currency makes materials more expensive to foreign buyers.
Brent crude, already at multi-month lows, was last down 2.1% at $ 51.10 in Asia trade. Gold is up 0.2% at $ 1,093.50 an ounce after hovering near five-year lows last week.
Monday’s gloomy manufacturing data from China also pressured industrial metals, with three-month aluminum futures near a six-year low at $ 1,621 a ton, up from the opening price of $ 1,617.50 per ton. Copper futures were trading down $ 11 from the opening price of $ 207.50 a ton, near the lowest level in recent months.
Elsewhere, Australia’s S&P ASX 200 lost 0.4%, the Nikkei Stock Average was down 0.2% and South Korea’s Kospi slid 1.1%.
The share declines in Japan came even as the yen weakened. The currency last traded at 124.070 from 123.92 late Friday in Asia.