June 21, 2012 (Chinavestor) Ongoing EU problems, now high bond yields in Spain, coupled with flash PMI of seven month low sent investors to the defense. China's flash PMI for May, calculated by HSBC, declined to 48.1% down from 48.4% a month earlier, highlighting fears that the worlds second largest economy is cooling off. Energy and commodity stocks led the decline but power generators and airliners soared on lower energy and kerozene costs. China Eastern Airlines (HKG:0670) was the best component of the 2 member Hang Seng index (INDEXHANGSAENG:.HSI) after a 2.9% surge. The index itself fell 253.8 points or 1.3%. China Coal (HKG:1898) and CNOOC Ltd. (HKG:0883) fell 3.5% and 3.2%, respectively. Mainland Chinese H shares led the decline for most components of the Xinhua 25 China Index fell for the day. This bodes ill for the iShares FTSE/Xinhua China 25 Index (NYSE:FXI), the most liquid Chinese ETF trading on the NYSE.
Investors focused on the weak PMI reading in Shanghai, sending the Shanghai Composite Index (SHA:000001) 32.0 points or 1.4% lower for the day. The index has been losing ground in the last 30 days as uncertainty about Europe's fiscal condition and its impact on Chinese exports started to bite.