China CDS Spikes To Highest Since MAR09 As PMI Disappoints

China's HSBC Flash Manufacturing PMI was released earlier this evening and showed continued weakness at 49.4 (below 50 implying a majority of manufacturers saw conditions deteriorating). The continuing moderation of growth is weighing on the Shanghai Composite which is down around 2% but it is the CDS market that is really cracking. 5Y China CDS is now an additional 20bps wider than the 10bps decompression we saw during Wednesday and is back to March 2009 levels at 167bps. It seems global markets are disrupted.



UPDATE: A number of Asia-Pac Sovereigns are cracking wider this morning:


Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:

“This is a similar moderating growth picture as in the previous two months. Fears of a hard landing are unwarranted. External demand weakened a little but official trade data still show solid export growth. China is less dependent on net exports, whose contribution to GDP growth was almost zero in 1H. Resilient domestic demand is sufficient to support around 8.5-9% growth in the coming quarters.”


From Markit's Economics Site:



Kiwi and Aussie are weaker post this print which is having its own negative impact on carry-driven US equity markets which legged down further this evening. China's CDS remains notably lower relative to its Govt bonds than other major global economies and perhaps the lack of printing in the US is enough to squeeze the USD-denominated CDS spread up towards bond-parity? If nothing else, this is a significant move even for a less-than-perfectly-liquid market.