China moving ahead in Asia

by: Maritza Cabezas

August’s official PMI was the highest since May 2012, rising to 51 from 50.3 in July. This positive PMI report is a sign that the economy is stabilising, on the back of a number of measures that authorities have announced recently. These include investment in certain sectors such as railways, as well as procedures to simplify investment approvals and measures to support exporters. This policy fine tuning continues to be consistent with the pledge to rebalance the economy, which suggests that a strong rebound is not in the cards. Meanwhile, to help reduce pressure on the Rupee, authorities in India decided to open a forex swap window for India’s three largest public sector oil companies. Given that oil is India’s main import component, thiswas a positive move. The question is whether this and other measures recently adopted will have a lasting impact on the Rupee. We think that this is unlikely. Concerns surrounding India have moved from the current account and are now focussed on removing the structural impediments to growth. Second quarter GDP came in at 4.4% yoy, down from 4.8% in Q1. This disappointing GDP report and declining business confidence have led us to revise our GDP forecast to 5% in 2013 and 2014.