China lifts factory sentiment across Asia amid hints of recovery


  • Economy
  • Tuesday, 03 Dec 2019

While purchasing manager indexes for South Korea, Japan, Malaysia and Indonesia nudged higher, they all stayed in contraction territory below 50, data from IHS Markit showed yesterday.

HONG KONG: A pickup in China’s factory sentiment filtered across Asia in November, though there were few signs of a strong rebound yet.

While purchasing manager indexes for South Korea, Japan, Malaysia and Indonesia nudged higher, they all stayed in contraction territory below 50, data from IHS Markit showed yesterday. Taiwan held steady at 49.8, while Thailand dropped to 49.3.

Vietnam’s PMI rose to 51 from 50, indicating that a recent soft patch in trade may have run its course in the South-East Asian economy.

Much of the better mood was down to China’s improved performance in the month. The Caixin index – which is more weighted toward China’s private manufacturing companies – rose to 51.8 from 51.7.

That followed news on the weekend that China’s official manufacturing purchasing managers’ index jumped to 50.2, the first reading above 50 since April.

“China is a major export destination for the rest of the region, ” Alex Holmes, an economist at Capital Economics Ltd in Singapore, wrote in a note.

“Although we remain sceptical that activity is as strong as the Caixin PMI implies, the synchronised improvement in the survey data does point toward an uptick in growth in China last month, providing some hope for export-focused industry in the rest of the region.”

The improvement in the PMI comes amid mixed signals for the region’s economy.

While Japanese companies increased capital spending from the previous year by more than expected last quarter, in trade-reliant South Korea, export demand continues to slide. Shipments dropped 14.3% in November from a year earlier, the sixth straight double-digit decline, data from the trade ministry showed last Sunday.

The nation’s better PMI was helped by an uptick in electronics demand linked to new smartphone and automotive product launches.

In Japan, factories remain dogged by soft demand, according to Joe Hayes, an economist at IHS Markit.

“Export orders dropped at the fastest rate since mid-year amid reports of demand weakness at key trade destinations, namely China, ” he wrote in a report.

Much now depends on how the ongoing trade negotiations between the US and China play out and how sustained the upswing in China proves.

“Considerable challenges remain, ” said Chang Shu, chief Asia economist for Bloomberg Economics. — Bloomberg

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