Shanghai Composite dips despite upbeat PMI

Shanghai stocks edged lower this morning even though fresh data showed China's manufacturing activity expanded for a fourth straight month in June.

The key Shanghai Composite Index shed 0.16 percent, or 3.32 points, to 2,045.01. Half-day turnover was 49.2 billion yuan (US$7.9 billion).

China's official Purchasing Managers' Index, a gauge of manufacturing activity slanted more towards state-owned firms, rose to 51 in June, compared with 50.8 in May, the National Bureau of Statistics said today. A reading of 50 or higher indicates the activity is expanding.

"The rise in the PMI reflects a more broad-based improvement in sub-indexes, led by new orders," said Zhang Zhiwei, chief China economist with Nomura, in a note today.

"This confirms our view that recent policy easing has helped stabilize growth momentum," Zhang said.

Meanwhile, the HSBC China PMI, a gauge of manufacturing activity slanted more towards private and export-oriented firms, rose to 50.7 from May's 49.4. The index moved into the expansion territory for the first time in six months.

Heavy-industry manufactures led the market down as investors locked in profits from a big surge yesterday.

Xi'an Aero-Engine Plc fell 2.8 percent to 25.06 yuan after increasing nearly 6 percent yesterday. Jiangxi Hongdu Aviation Industry slipped 1.8 percent, paring a 4.7 percent gain made a day earlier.