Mixed signals released on China's industrial outlook

Mixed signals about the mainland's industrial outlook were released yesterday as an official indicator for manufacturing rose slower than expected while a similar private survey showed activities accelerated to a two-year high.

Analysts believe the strength of new orders will continue to support an economic recovery, but some weak spots remain in areas such as exports. The Lunar New Year complicates the picture, they said.

The official purchasing managers' index fell to 50.4 in January from 50.6 the month before, the National Bureau of Statistics said yesterday. Though the reading still held up above the threshold of 50, indicating an expansion, it was below the market consensus of 51.

However, the final HSBC PMI, also released yesterday, was revised up to 52.3 for last month from the preliminary reading of 51.9, as both new orders and output hit the highest levels in two years. Employment also gained faster, according to HSBC and Markit Economics. The PMI gauge stood at 51.5 in December.

The Shanghai Composite Index was down 0.7 per cent in intraday trading after the official PMI was announced. The market recovered later, ending 1.4 per cent higher at 2,419.02 points.

The official January data was "a bit disappointing", Bank of America Merrill Lynch economists said. But they said they expected that markets would not turn significantly bearish, as the PMI was quite an inaccurate barometer around the Lunar New Year holiday because of heavy seasonal adjustments.

The bank maintains its 8.1 per cent forecast for mainland growth this year but has advised investors to get more cautious around mid-year.