Asia Economic Resilience Seen in China Manufacturing Gauge, Japan Exports
China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output.
The reading of 51.1 for the index released by HSBC Holdings Plc and Markit Economics today was the highest in five months and compares with the final reading of 49.9 for September and August. A reading above 50 indicates expansion.
The Chinese report, along with Japanese data today showing an increase in exports exceeding economists’ forecasts, signaled that Asia’s largest two economies are withstanding Europe’s sovereign debt crisis. Shares and currencies in the region advanced as the figures, and a plan by European leaders to contain the region’s financial woes, buoyed investor confidence.
“As long as Europe and the U.S. see very weak growth but not an outright recession, Asia in general and larger, more domestic-demand driven economies such as China, India and Indonesia in particular, should hold up,” said Louis Kuijs, Hong Kong-based chief Asia economist at MF Global Holdings Ltd., who previously worked in Beijing at the World Bank. “The PMI data today underlines just how well China’s industrial sector is holding up against the global slowdown.”
The MSCI Asia Pacific Index climbed 2.6 percent as of 5:19 p.m. in Tokyo. Stocks in China rallied after the data. The benchmark Shanghai Composite Index rose 2.3 percent to 2,370.33 at the 3 p.m. close. The gauge declined earlier after Premier Wen Jiabao signaled over the weekend that policy makers will maintain an anti-inflation monetary stance.
The yuan rose 0.17 percent to 6.3732 as of 12:33 p.m. in Shanghai, according to the China Foreign Exchange Trading System. The yen was little changed at 76.21 per dollar at 5:24 p.m. in Tokyo. The currency rose to a post-World War II high of 75.82 last week, prompting Japanese Finance Minister Jun Azumi to signal today he’s ready to intervene in the currency market to stem its gains, saying Japan may take “decisive” steps.
Japan’s exports increased 2.4 percent in September from a year earlier as demand for cars and auto parts rose, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg was for a 1 percent advance after a 2.8 percent gain in August.
In Taiwan, industrial production rose 1.62 percent in September from a year earlier, government data showed today. That was slower than the median of 11 estimates for a 6.1 percent increase. At the same time, the island’s jobless rate fell to 4.27 percent last month compared with economist expectations of a 4.4 percent rate, another report showed.
Emerging markets are strong and resilient, Nouriel Roubini, the co-founder and chairman of Roubini Global Economics LLC, said in Jakarta today. He also said there’s a 50 percent probability of recession in the U.S., euro area and the U.K.
Inflation remains a concern for Chinese policy makers. The nation must continue efforts to control food and housing prices, Wen was quoted as saying by the official Xinhua news agency during a visit to southern city of Nanning. He also said that job creation should be a “priority” and that more support should be given to smaller businesses and private companies, according to the Xinhua report.
Consumer price increases have exceeded the government’s 2011 target of about 4 percent every month and accelerated to a three-year high of 6.5 percent in July from a year earlier. The pace moderated to 6.1 percent in September after the central bank raised interest rates, curbed lending and boosted subsidies to farmers.
HSBC’s preliminary manufacturing index, known as the Flash PMI, is based on 85 percent to 90 percent of the total responses to its monthly purchasing managers’ survey sent to executives in more than 400 companies.
The number has matched the final reading twice since HSBC began publishing the series in February. The index fell below 50, the level that separates expansion from contraction, in July. Manufacturing contracted for eight months through March 2009 during the global recession sparked by the U.S. mortgage- market collapse.
Output advanced at a faster rate and new orders and export demand expanded after contracting the previous month, today’s release indicated. The input prices sub-index rose at a slower rate, while the output price gauge accelerated.
No ‘Hard Landing’
The data “confirm our view that there is no risk of a hard landing in China, Qu Hongbin, a Hong Kong-based economist with HSBC, said in a statement on the PMI report. The index’s expansion marks ‘‘a steady start to manufacturing activities in the fourth quarter.’’
The official manufacturing index released by the statistics bureau and the China Federation of Logistics and Purchasing had a reading of 51.2 in September. The gauge hasn’t fallen below 50 since February 2009.
‘‘If the official PMI follows suit of the HSBC PMI, we are probably further away from any hope of a meaningful stimulus,’’ said Dong Tao, a Hong Kong-based economist with Credit Suisse AG. ‘‘I’m not convinced that the down cycle is over judging from steel, shipping, auto orders and home sales.’’
Xugong Group Construction Machinery Inc., China’s biggest maker of construction equipment, has seen demand cool since April amid monetary tightening by the central bank and is ‘‘concerned’’ about Europe’s economic outlook, Chairman Wang Min said last week. Even so, government policies to boost spending on water projects and spur construction of public housing offer ‘‘big room’’ for manufacturing to pick up, he said.
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