China's manufacturing may contract at a more moderate pace in October, adding to signs that the nation's seven-quarter growth slowdown is ebbing.
The preliminary reading was 49.1 for a purchasing managers' index released today by HSBC Holdings Plc and Markit Economics. It compares with a final level of 47.9 for September. A reading above 50 indicates expansion.
The survey may bolster prospects that China's expansion will rebound from a three-year low after official data showed exports, production and investment accelerated last month. That would reduce the urgency for leaders to roll out more pro-growth policies ahead of a Communist Party congress set to begin Nov. 8, part of a once-a-decade power handover.
"The filtering-through of the earlier easing measures" helped boost the gauge, with a new-orders index at a six-month high, Qu Hongbin, chief China economist at HSBC in Hong Kong, said in a statement. At the same time, China still faces challenges from abroad and lingering job-market pressures, Qu said. "This calls for a continuation of policy easing in the coming months to secure a firmer growth recovery."
The benchmark Shanghai Composite Index pared losses after the report. The gauge was little changed at 9:56 a.m. local time after falling 3.9 per cent this year.
A separate, government-backed index, which showed a second straight contraction in September, is due to be released Nov. 1. The final HSBC-Markit index for October will be published the same day.
Today's report follows data showing industrial production in September rose a more-than-estimated 9.2 per cent from a year earlier, the first pickup in four months. Retail sales climbed 14.2 per cent, the most since March, and fixed-asset investment excluding rural households for the first nine months of the year increased 20.5 per cent.
China's exports rose at the fastest pace in three months in September. Overseas shipments increased 9.9 per cent from a year earlier while imports rose 2.4 per cent.
Even so, China's government won't provide a large economic stimulus and a strong rebound in growth is unlikely, Song Guoqing, an adviser to the People's Bank of China, said Oct. 18. Still, slowing inflation gives China's central bank room for "tweaking" monetary policy, said Song, an academic member of the central bank's monetary policy committee.
Henan Shuanghui Investment & Development Co., operator of China's largest meat-processing facility, said on Oct. 19 that its profit in the third quarter rose 111 per cent from a year earlier to 949.5 million yuan ($152 million). Huayi Compressor Co., a maker of compressors for air conditioners and refrigerators, said third-quarter profit increased more than 800 per cent from a year earlier to 34.4 million yuan.
The cost of options to protect against losses in Chinese stocks traded in Hong Kong fell this month to the lowest level in six years as investors bet growth would strengthen.