Chinese manufacturing is contracting as activity hits its
weakest pace in seven months, according to HSBC's preliminary reading on the
sector for February, released Thursday. The HSBC/Markit "flash"
version of its monthly Purchasing Managers' Index dropped to 48.3 compared to a
final reading of 49.5 in January. A reading below 50 suggests contraction,
while one above 50 shows expansion. The subindex for manufacturing output also
hit a seven-month low, while the employment gauge showed a faster decrease than
in the previous month. The new-orders component swung to a decrease as well, with
new export orders also showing a decline, though at a slower pace than in
January. HSBC chief China
economist Hongbin Qu said the result reflected "renewed destocking
activities." Qu said that "Underlying momentum for manufacturing
growth could be weakening. We believe Beijing
policy makers should and can fine-tune policy to keep growth at a steady pace
in the coming year." The flash PMI
usually includes 85% to 90% of the survey responses used for the final report,
which is due out March 3. Stocks lost ground following the data, with Hong
Kong's Hang Seng Index HK:HSI
-0.74% moving to a 0.9% loss from a 0.1%
gain, while the Shanghai Composite CN:SHCOMP +0.79% was 0.6% higher, paring a 1.5% rally before
the release. The Australian dollar AUDUSD -0.55% fell to 89.49 U.S. cents from 90.03 U.S. cents
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