A key gauge of Chinese manufacturing activity plunged to a two-year low in July, an independent survey showed Monday, the latest data suggesting the world's second-largest economy faces downward pressure in the third quarter.

The final reading of Caixin's Purchasing Managers' Index (PMI) came in at 47.8 for the month, the Chinese media group said in a joint statement with Markit, a financial information services provider that compiled the survey, down from a preliminary 48.2.

The figure was below the 49.4 registered in June and was the weakest reading since 47.7 in July 2013, according to previous data.

The index, which tracks activity in factories and workshops, is seen as a key barometer of the country's economic health.

A figure above 50 signals growth, while anything below indicates contraction.

"July data signalled that the downturn in China's manufacturing sector intensified at the start of the third quarter," Caixin and Markit said in the release.

"Renewed falls in both total new work and new export orders led manufacturers to cut production at the fastest rate since November 2011."

The result, which missed a median estimate of 48.3 in a survey by Bloomberg News, came after China announced on Saturday that its official PMI slowed further in July, decelerating to 50.0 from 50.2 in June according to the National Bureau of Statistics.

Caixin took over sponsorship of the PMI survey from British banking giant HSBC from July.

"The weaker Caixin PMI, together with a lower official PMI, suggests that growth momentum may have slowed slightly in July," Nomura economists said in a reaction.

The results mean that China's year-on-year industrial production growth for last month may come in lower than their current estimate of 6.8 percent, they added. Industrial output expanded 6.8 percent in June, an acceleration from May.

- Stormy weather -

Julian Evans-Pritchard, China economist at Capital Economics, said that bad weather was a factor in the July PMI results.

"The weak readings partly reflect temporary disruptions to factory activity as a result of a number of tropical storms that hit China's key manufacturing hubs over the past month," he said in a report.

Many of China's export-oriented factories are concentrated in coastal areas in the south and east and more vulnerable to adverse weather during the summer storm season.

China's economy, a key driver of global growth, expanded 7.4 percent last year, its weakest since 1990, and has slowed further this year, growing 7.0 percent in each of the first two quarters.

The PMI releases are the first key snapshots of economic performance in the July-September quarter.

Authorities accept the need to steer China's growth lower to make it more sustainable and driven by consumer demand rather than investment but have taken stimulatory measures to put a floor under the slowdown.

This is aimed at ensuring that employment -- a pillar of social stability in Communist Party-ruled China -- is not negatively affected.

The central People's Bank of China in June announced its latest cut in benchmark interest rates, the fourth such move since November, in an effort to boost lending as fuel for the economy.

It has also lowered cash reserve requirements for banks as well as other steps such as easing mortgage policies to boost the property market, a key reserve of wealth for many Chinese.

Economists said that China's recent stock market convulsions -- the key Shanghai stock index plunged more than 30 percent from a June 12 peak before rebounding on official intervention measures -- may have impacted PMI survey results.

"Although the recent stock market volatility has hurt business sentiment and may have led firms to provide more downbeat responses to the latest PMI surveys, we think it will have a limited impact on real economic activity", Evans-Pritchard wrote.

HSBC profits fall 3.8% in Q2, Brazil sell-off agreed
Hong Kong (AFP) Aug 3, 2015 - HSBC announced Monday that net profit fell 3.8 percent in the three months to June, as the company agreed to sell its Brazilian business for $5.2 billion to Brazil's Banco Bradesco.

Europe's biggest bank announced in June that it would cut its global workforce by up to 50,000 as it exits Brazil and Turkey.

The moves come as HSBC tries to boost profits and move past recent scandals, including the rigging of foreign exchange markets.

In the first half of 2015 net profit dropped 1.3 percent, although the company emphasised a rise in pre-tax profits, which went up 10 percent over the six months.

Quarterly profit fell to $4.36 billion from $4.54 billion in the same period last year, while the half yearly figure fell from $9.746 billion to $9.618 billion.

"The environment for banking remains challenging," said group chairman Douglas Flint, but added that the bank still held a "privileged position" in global trade and investment.

"We have the financial strength and the right people at all levels of the firm to make the most of the opportunities open to us," Flint added.

HSBC confirmed the Brazil sale in a separate statement to the Hong Kong bourse.

"The sale of HSBC Brazil represents a significant step in HSBC's stated goal to optimise its global network and reduce complexity," the statement said.

CEO Stuart Gulliver added: "I am pleased to be able to announce today a transaction which achieves both a solid financial outcome and swift delivery of one of our stated actions."

HSBC is also mulling the relocation of its London headquarters, with the review due to be completed by the end of the year, the report said.

Shares in the banking group were up 1.36 percent in early afternoon trading at HK$70.65 (US$9.11).

- Legal storm -

HSBC was forced in February to apologise for "unacceptable" failings at its Swiss division following allegations that the unit helped rich clients hide billions from the taxman.

It has faced a storm over claims that it helped clients from around the world dodge taxes on accounts containing 180 billion euros ($204 billion) between November 2006 and March 2007, in cases that are being investigated in several countries.

The Asia-focused lender is facing a French criminal probe over the affair.

In its report Monday HSBC said it was "cooperating with the relevant authorities" over the investigations.

"There are many factors that may affect the range of outcomes, and the resulting financial impact, of these investigations and reviews, which could be significant," the report said.

It added that further investigations could be possible, with a $1.14-billion provision for regulatory settlements put aside in the first half.

Separately, HSBC was fined late last year by US and British regulators for attempting to rig foreign exchange markets.

"We haven't had huge expectations from HSBC for a very long time," said Jackson Wong, associate director for Simsen Financial Group.

"The return to shareholders was pretty decent. One percent drop (in the first six months) was not that much," Wong told AFP.

But the bank will face uncertainties in the second half of the year he added.

"A lot of things could happen. For one, the (slowdown) of the Chinese market could have an impact on the world banking system.

"Also, by the end of this year we should be able to know whether they will relocate their headquarters from London to places such Hong Kong. It will be the focus."