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China, India manufacturing boosts recovery hopes

NEW DELHI — Factory activity picked up pace in Asia with China showing stronger momentum and India also gathering steam, according to business surveys released on Wednesday, buoying recovery hopes in the region.

HSBC’s Purchasing Managers’ Index (PMI), a measure of manufacturing activity, increased for China in April, suggesting the health of the world’s second-largest economy was improving.

India’s factory sector also edged higher month-on-month, led by new orders, the HSBC’s Indian PMI suggested, striking a brighter note for the South Asian country that is facing escalating economic and fiscal challenges.

“These are still soft numbers but we may be seeing Chinese — and Asian growth — starting to stabilise,” Brian Jackson, senior emerging markets strategist at the Royal Bank of Canada in Hong Kong, told AFP.

HSBC’s China PMI improved to 49.3 in April from 48.3 in March and “confirms the pace of China’s slowdown has stabilized”, said HSBC China economist Hongbin Qu.

An index reading over 50 signals growth while below 50 indicates contraction.

While HSBC’s China index reading was not as strong as Beijing’s official PMI reading the previous day which hit a 13-month high of 53.3 in April, the HSBC economist said: “We expect Chinese GDP growth to bottom out in the second quarter and recover modestly to over 8.5 percent in the second half.”

China’s annual growth slowed to 8.1 percent in the first quarter of 2012 from 8.9 percent in the previous three months — its slowest pace in nearly three years.

“These (PMI) numbers are good news along with the numbers out of the US,” said Royal Bank of Canada’s Jackson, referring to the US Institute for Supply Management, which reported a surprise rise Tuesday in its widely watched manufacturing index.

Strong orders lifted India’s PMI manufacturing activity to 54.9 in April from 54.7 in March even as rising prices spotlighted still stubborn inflation risks.

“Business conditions seem to have improved a bit and the increase in order flows from domestic and overseas customers suggest the pace of growth could hold up in coming months,” said HSBC’s chief India economist Leif Eskesen.

There was also upbeat data from South Korea with factory output rising at the fastest clip in more than a year as new orders sustained a third straight month of manufacturing expansion.

Monetary easing by key trading partners, such as China, “is filtering through to higher demand for Korean goods”, said HSBC economist Ronald Man.

The firmer Asian manufacturing numbers swept many Asian stock markets higher with Hong Kong rising 1.02 percent, Shanghai climbing 1.76 percent and Seoul adding 0.86 percent even as gloom over eurozone output remained a bearish factor.

The Markit Purchasing Managers’ Index for the euro zone slumped to 45.9 from 47.7 in March, signalling shrinking of the manufacturing sector, and suggesting a growing economic chasm between Europe and the rest of the world.

Taiwan’s manufacturing sector grew in April, albeit at a weaker pace, with HSBC saying low demand in the West would constrain the island’s export expansion for a while longer, making domestic demand an important driver.

In Indonesia, manufacturing also grew at a slightly slower clip in April.