China ETFs Tumble After Disappointing Flash Manufacturing Data

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All eyes were on the Federal Reserve ‘s policy announcement yesterday, as investors finally got “some” answers to their lingering questions. In the highly anticipated report, the central bank announced that it will continue its $85 billion-per-month bond-buying program for now, but indicated that a tapering could come later this year. Today, however, investors turned their attention to China, after the powerhouse nation reported a disappointing reading on its critical manufacturing sector [see Single Country ETFs: Everything Investors Need To Know].

Warning Signs: China’s HSBC Flash Manufacturing PMI Takes a Big Hit

The latest HSBC Flash Manufacturing PMI report showed China’s crucial

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manufacturing sector shrinking at a faster rate this month. June’s PMI came in at a dismal 48.3, the lowest reading in nine months, versus the expected 49.4. A reading below 50 indicates industry contraction.

In the previous recording, the Flash Manufacturing PMI also missed the mark with the figure coming in at 49.6, compared to the forecasted 50.5.  May’s report put the industry into contractionary territory for the first time in seven months. Thus far in 2013, this critical index was reported well below expectations in the last five of six readings.

Consider the trailing six-month PMI data below and note the steep drop we have seen over the last four months:

China ETFs Performance Recap

Today’s disappointing manufacturing data is just one of many red flags investors have seen in the Chinese economy. The country’s weak manufacturing industry and credit crunch have caused China ETFs to take significant hits in recent months. Year-to-date, the FTSE China 25 Index Fund (FXI, B) has tumbled nearly 20%, and over the trailing one-month period the fund is down over 12% [see also US ETF Assets Could More Than Double by 2017]:

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Disclosure: No positions at time of writing.

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