Contagion from Europe hits Asia

Weak manufacturing activity in China and dismal growth data from Japan, Australia and South Koreahave underscored Asia’s vulnerability to the European turmoil and sparked fresh calls for EU intervention.

Asia was long considered a global bright spot primarily the BRIC nations but also the emerging nations have been the silver lining in this gloomy recession, and even a haven from Europe’s deepening crisis and the weak US recovery. But the pacific region is starting to feel the heat as overseas markets deteriorate.

The disappointing data emphasized calls for China’s and India’s governments to kick-start their economies to escape hard landings, which could worsen the already fragile global outlook.

China’s economic slowdown is more severe than expected. Export orders are continuing to fall, which is definitely related to Europe’s debt crisis. Uncertainty in Europe is high. China needs to move faster and more aggressively to speed up loosening of its monetary and fiscal policies. Unfortunately, there is nothing that Chinese or Indian or Australia officials can do to motivate the EU and the ECB to quickly address the crisis in Europe. As the years pass by the toll on other economies grows.

China’s official purchasing managers’ index (PMI) for manufacturing indicated a sharper-than-expected slowdown in May, while separate PMI data released by British bank HSBC showed a contraction for the same month.

China has already cut bank reserve requirements three times since December as exports-a key engine of growth-have stumbled, causing economic growth to weaken to its slowest pace in three years for the first quarter.

There are signs that Beijing is ramping up spending with infrastructure projects, but officials and state media have ruled out a massive stimulus plan like a four-trillion-yuan ($635-billion) spending spree in 2008.

Meanwhile, India’s economy grew at a nine-year low of 5.3 per cent in the first quarter, data showed Thursday, as the global downturn hit the emerging market giant.

The unexpectedly grim figure was well below analysts’ forecasts for 6.1 per cent growth and coincided with China’s bleak data, dimming hopes that emerging countries will power the global economy back to health.

The slowdown in growth has proven deeper than expected.

Elsewhere, South Korea’s exports-an indicator for the region-declined year-on-year for a third straight month in May as the eurozone turbulence and China’s slowdown took their toll on the economy, figures showed Friday.

South Korea’s shipments to the United States dropped 16.5 per cent and those to the European Union fell 16.4 per cent.

Asian stocks have taken a further hit, following a miserable May in which most regional markets gave up almost all the gains they had made since the start of 2012 as Europe’s debt crisis came back into sharp focus.

Companies are also yanking massive initial public offers, citing the weak market conditions. London-based jeweler Graff Diamonds said Thursday it had decided to delay its $1.0 billion offer in Hong Kong.

Also, Formula One is waiting for “the most opportune” time to launch its $2.5 billion IPO in Singapore after turbulence returned to financial markets, a source said on Friday.

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