By Pete Sweeney and Michelle Price
SHANGHAI/HONG KONG (Reuters) - HSBC (L:HSBA) (HK:0005) has ended its marketing tie-up with financial information firm Markit Ltd (O:MRKT), both companies told Reuters on Friday, winding down a five-year relationship that some industry insiders said may have become too expensive and a potential political liability for HSBC in China.
Markit and HSBC spokespersons said that HSBC had ended its sponsorship of the closely watched China Purchasing Managers Index (PMI)
Both companies described the cooperation as a success; neither gave a specific reason for the windup of the arrangement.
"The sponsorship arrangement is now coming to an end and we will announce replacement sponsors soon," said Laura Davis, a Singapore-based spokeswoman for Markit in an email statement.
Market insiders have been chattering about the coming end of the partnership for months, with some speculating that HSBC was ending its sponsorship of the indicator because of pressure from Beijing, or because the sponsorship costs had become too expensive, or both.
HSBC announced earlier in June that it would eliminate 50,000 jobs, slashing its headcount by nearly a fifth, in order to combat sluggish growth.
HSBC produces its own branded research reports on economic trends around the world.
"What I heard was that they were questioned by the NBS (China's National Bureau of Statistics) about differences with the official PMI," said a source at a foreign bank, who declined to be identified because he was not authorised to speak to the press.
However, HSBC is not only winding up its sponsorship of the China PMI indicator, but also of all the other Markit indexes that cover other countries, implying that other factors were also at play, in particular the cost of sponsoring an index that has become one of the most closely economic indicators in the world as China struggles to get its slowing economy back on track.
"The price tag on the China PMI (sponsorship) is very high and many institutions cannot accept it," said the banker.
Multiple banking sources said that Markit had been seeking other sponsors around Asia to replace HSBC, but many believed the price tag was too high, especially given the political sensitivity of being associated with an indicator that frequently contradicts the official manufacturing PMI
However, while the results were different, so was the survey pool. The HSBC/Markit report tended to focus on smaller and mid-sized companies, while the official survey reflected activity at larger, often state-owned firms.
