CHINA'S PMI FELL BELOW FORECAST

China's PMI fell below forecast in July, dropping to 48.2, very much below the forecast of 49.7. This is a 15 month low.

This could be an indication that China's Third Quarter GDP is under threat and may well fall below the 7% target.

The Second Quarter GDP just barely made 7%, but most of it was driven by investment and consumption due to the stock market's fantastic run during the First Half of the year. We all know what happened in July - the stock market crashed wiping off US$4T of wealth.

If anything, the July PMI is possibly giving indications that China's economy will remain weak.

What happens in China will reverberate across the region, including South East Asia. Singapore recently reported a GDP of -4.6% which caught everyone by surprise. It remains to be seen how the other Asian economies will fare, but I doubt there could be any significant upside.

Increasingly a number of indicators are already showing that Asian economies will continue to soften.

1) Baltic Index remains slightly above the 1,000 points. At one time it was above 10,000 points.
2) Interest rates reduction across major Asian economies
3) Weakness in several Asian currencies across the board

Investors should be aware of the potential slowdown in Asia which could erupt into a huge debt crisis due to the hefty debts incurred in the last few years.

Investment should be prudent with focus in liquidity and less of physical hard assets.

Just my own opinion, of course.