Weak Flash PMI Sends China (FXI), Emerging Markets (EEM) Lower

June 21, 2012 7:45 AM EDT
iShares MSCI Emerging Markets Index (NYSE: EEM) and iShares FTSE/Xinhua China 25 Index ETF (NYSE: FXI) are both expected to open lower on Thursday. Shares in China sold off overnight after China's flash PMI registered a reading of 48.1 compared to a reading of 48.4 last month. Readings below 50 are indicative of decelerating growth in manufacturing.

Investors are beginning to fear that China's attempt to slow inflation and deliver a soft landing for the economy is being stretched. Earlier in the month, China's central bank cut interest rates by 25 basis points, signaling a reversal in policy that was previously aimed at slowing equity and real estate speculation. Recent comments by Chinese officials signal that opposition to stimulus there is fading, but it is unknown exactly how much stimulus policy makers will be able to stomach.

iShares FTSE China 25 Index Fund (NYSE: FXI) is lower by 9.3 percent in the past three months and iShares MSCI Emerging Markets Index (NYSE: EEM) is lower by 8.5 percent over the same period.

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