Asia kicks off September with eyes on Beijing

An employee works on the production line at Jingjin filter press factory in Dezhou, Shandong province, China Aug 25, 2022. REUTERS/Siyi Liu/File photo

Asian stocks could start September with a choppy session on Friday, as crucial U.S. economic data showed monthly inflation on the wane, a second take on China manufacturing PMI expected to show modest improvement and the U.S. employment report on tap.

As investors turn the page to a fresh new month, any hint that central bank leaders could be nearing the end of a tightening cycle, thereby avoiding a potential global economic downturn, is likely to feed appetite risk.

Following in the wake of downbeat data, which showed China factory activity notched a fifth consecutive month in contraction territory, any upward surprise to the Caixin manufacturing PMI figure – expected to improve slightly to 49.3, less than a point below the contraction/expansion dividing line – could lure buyers back to Chinese equities markets.

Concern about sluggish demand in China has weighed on investor sentiment of late, with the blue-chip CSI 300 index in August clocking its largest monthly percentage decline since last October, and the Shanghai SE Composite suffering its steepest percentage drop since September 2022.

China’s real estate woes mount, with the nation’s largest private property developer Country Garden warning of default risk after posting a $6.7 billion net loss in the first half of the year.

But September could offer a fresh start.

Recent policy decisions and other steps taken by Beijing and Chinese firms to jump start investor sentiment and support local markets has had an effect. Chinese stocks this week posted back-to-back gains of 1 percent or more for the first time since January.

Here are key developments that could provide more direction to markets on Friday:

– South Korea – import/export growth, PMI (August)

– China – Caixin manufacturing PMI (August)

– Australia – owner-occupied housing financing (July)