Asia: Markets on edge ahead of China data

[HONG KONG] Asian stocks opened on a cautious note as China revised down its 2014 growth figure and prepared to release more data that will give clues on the slowing economy, a prospect that has global investors on edge.

However, a weaker than expected US jobs report reduced the chances of an interest rate hike later this month, analysts said, providing some much-needed support to the Australian dollar which is sitting at six-year lows against the greenback.

In the face of the latest bout of volatility, G20 finance ministers and central bank heads pledged at the weekend to shore up economic growth and avoid a currency war following China's yuan devaluation last month that convulsed markets.

Eyes this week are again on China, which will release a string of indicators - from inflation and retail sales to trade and investment - that will provide a handle on the state of the world's number-two economy.

A painful slowdown in growth in the country has seen huge losses on global stock markets - including about 40 percent in Shanghai - despite Beijing's attempts to provide support, including five interest rate cuts since November.

"The key focus this week would be China as the market reopens," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. "Investors are increasingly concerned about the slowdown in the Chinese economy," he told Bloomberg News.

There were hefty losses last week after an official gauge of factory activity came in at a three-year low, showing contraction.

And on Monday Beijing said the economy grew last year at a slower rate than initially thought, expanding 7.3 per cent instead of the 7.4 per cent first stated, its slowest rate in a quarter of a century.

While experts cautioned against reading too much into the manufacturing figures, another soft set of readings this week could be an excuse to sell.

Analysts say China needs to rebalance its economy so that it relies more on consumer demand and less on lavish state spending. A successful transition is seen as crucial for the worldwide economy.

In early exchanges Monday, Shanghai was 0.20 per cent higher as dealers returned from a four-day break, while Hong Kong lost 0.39 per cent and Tokyo shed 0.36 per cent by lunch. Sydney, where several firms reliant on China for business are listed, was 0.60 per cent off.

However, the "Aussie" dollar edged up against its US counterpart after Friday's jobs data muddied the waters for US Federal Reserve policymakers as they decide whether to lift rates this month.

The Labor Department said the economy added 173,000 jobs in August, although the previous two months' job gains were revised upwards, pushing the unemployment rate down more than expected to 5.1 per cent.

"We're seeing the negative effects from China and emerging economies," said Shoji Hirakawa, chief equity strategist at Okasan Securities.

"The US has started seeing that there's a risk of contagion as China's economy slows. The jobless rate fell, but labour participation was weaker. I think a rate hike in September will be difficult," he said.

On Monday the Aussie was at 69.34 US cents against 69.09 cents Friday, which was a fresh six-year low.

US shares slipped after the jobs figures, providing a negative lead to Asia. The S&P 500 retreated 1.53 per cent, the Dow sank 1.66 per cent and the Nasdaq lost 1.05 per cent.

AFP