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.
Economic growth has rebounded since the fourth quarter from three-year lows as infrastructure investment and export growth quickened. The economy expanded 7.8 per cent last year.
Standard Chartered Bank recently raised the country's growth forecast for this year and next to 8.3 and 8.2 per cent respectively, from 7.8 per cent earlier.
However, analysts warn of excessive capacity, financial risks and a gloomy export outlook. Some researchers have questioned the huge volatility in recent export data, saying local governments may have inflated year-end trade performances.
The pick-up may be still fragile, two economists from Australia and New Zealand BKG, Liu Ligang and Zhou Hao, said in a research report. They also said a change in the official survey's methodology may have distorted the picture, with 3,000 companies now covered, up from 820.
The new orders sub-index in the official survey rose to 51.6 in January, the highest since May and up from 51.2 in December. However, new export orders contracted to 48.5 from 50 in the previous month, while the output sub-index fell to 51.3 from 52.
The HSBC PMI showed broad-based improvement, with output and new orders sub-indices rising to 53.1 and 53.7 respectively, while the new export orders index showed a modest expansion, climbing to 50.5 from 49.2 in December.
The HSBC PMI is believed to be a better proxy for smaller companies than the official figure.