Bloomberg News

Asian Economies Weaken as European Crisis Crushes Confidence

October 03, 2011

Oct. 3 (Bloomberg) -- Indian and Australian manufacturing data were the weakest since 2009 and Japanese business sentiment failed to recover from the March 11 earthquake, signaling Asian economies are slowing as investor confidence sinks.

A purchasing managers’ index for India fell to 50.4 in September from 52.6 in August, HSBC Holdings Plc and Markit Economics said in an e-mailed report today. A gauge for Australia slid to the lowest since June 2009. In Tokyo, the Tankan index of large manufacturers was at 2 in September, compared with 6 before the quake.

Asian stocks tumbled ahead of a meeting of European finance ministers to consider measures to counter the sovereign-debt crisis, highlighting limits on the support that the region can give to global growth. An increase in a manufacturing index for China released Oct. 1 suggests that the nation’s economy is so far weathering the global financial turmoil, although a separate HSBC survey indicated smaller companies are suffering.

“At the most what we can hope for is China’s resilience can help Korea and Southeast Asian economies to avoid recession,” said Frederic Neumann, co-head of Asian economics at HSBC in Hong Kong. “Asia cannot save the world.”

The MSCI Asia Pacific Index tumbled 2.9 percent at 3:04 p.m. in Tokyo, after slumping last quarter by the most since 2008.

In India, record interest-rate increases are contributing to a slowdown. The Reserve Bank of India last week signaled it may maintain its tight monetary policy after Governor Duvvuri Subbarao said inflation remains above an acceptable level. nation’s recovery.

‘Not Charging Forward’

In Tokyo, the quarterly Tankan index of sentiment at large manufacturers rose from minus 9 in June, the Bank of Japan said.

“We can be happy we’re not seeing a further slump here,” Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, said in an interview with Bloomberg Television. At the same time, companies are indicating “we are really not charging forward right now,” given risks in the global outlook and the continued wait for Japan’s government to implement full-scale reconstruction, he said.

An Australian manufacturing index dropped to 42.3 from 43.3 in August, the Australian Industry Group and PricewaterhouseCoopers said today. It was the sixth month in seven the index was below 50, the dividing line between expansion and contraction.

“Caution continues to be the order of the day with most respondents uncertain about the outlook,” Heather Ridout, chief executive officer of the industry group.

Chinese Data

In China, the Purchasing Managers’ Index published Oct. 1 by the logistics federation rose for a second month, to 51.2. A separate PMI from HSBC Holdings Plc and Markit Economics on Sept. 30 was unchanged from August, at 49.9.

The index from HSBC Holdings Plc and Markit Economics, which reflects a survey of more than 400 companies, is more weighted toward small businesses that have been hit harder by tightening measures, according to economists including Bank of America’s Lu and Australia and New Zealand Banking Group Ltd.’s Liu Li-Gang. The official PMI has a greater focus on larger enterprises, they say.

--With assistance from Tracy Withers, Unni Krishnan and Kartik Goyal. Editors: Paul Panckhurst,

To contact Bloomberg News staff for this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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