The iShares FTSE China Large-Cap ETF (NYSEArca: FXI) declined more than 1% on Thursday to fall below its 50-day and 200-day simple moving averages following weak manufacturing data.
HSBC said the preliminary or “flash” version of its Purchasing Managers’ Index for May was weaker than expected and fell to a seven-month low of 49.6, MarketWatch reported.
It is the first time the flash PMI index has dropped under 50 since October — a reading below 50 signals contraction.
“The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of [the second quarter], casting downside risk to China’s fragile growth recovery,” said HSBC chief China economist Hongbin Qu.
FXI, the China ETF, was down about 7% year to date heading into Thursday’s trading as emerging markets have trailed the S&P 500. U.S. stock indices clawed back to near even in midday action Thursday following an early sell-off.