China slowdown impacts commodities

China , Commodities Sep 23, 2014 No Comments

BCOMThe Bloomberg Commodity Index dropped 0.8 percent to 118.5683 at 1:52 p.m. in New York, after touching 118.2027, the lowest since July 17, 2009. Commodities are 12 percent lower this quarter, set for the biggest such loss since the financial crisis in 2008.

China’s Finance Minister Lou Jiwei said growth in Asia’s largest economy faces downward pressure and reiterated that there won’t be major changes in policy in response to individual economic indicators. Group of 20 finance chiefs and central bankers said low interest rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth.

China’s economy is growing in a stable way and operating within a reasonable range, said Lou in a statement published on the People’s Bank of China website. Macroeconomic policy will focus on “comprehensive” targets, particularly job growth and price stability, according to the statement.

His comments quelled speculation that weaker economic data will spur further stimulus in the world’s second-biggest economy. A private gauge of Chinese manufacturing probably dropped for a second month in September, economists in a Bloomberg survey said before a report tomorrow. Data last week showed foreign direct investments decreased to a four-year low and home prices fell in all but two cities tracked by authorities.

Lou “gave a real hint that the recent policy easing may actually be quite limited,” Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong, said by phone. “We’re not just going to see this wall of money thrown at the Chinese slowdown.”

“It looks like the Chinese government recognizes that the economic boom is over,” said Andrea Williams, who helps oversee 50 billion pounds ($82 billion) of investments as head of European equities at Royal London Asset Management Ltd. in London. “The country is settling down to a lower level of growth.”

“We are looking at a downturn right now as China continues to disappoint,” Justin Smirk, a senior economist at Westpac Banking Corp., said today by phone from Sydney. “It’s about the uncertainty that people are worried about.”

A preliminary reading on the HSBC Holdings Plc and Markit Economics China Purchasing Managers’ Index for September will probably show a drop to 50 from 50.2 in August. The report is due tomorrow.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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