WRAPUP 1-Chinese manufacturing picks up as orders flood in

* Growth in new orders and export orders accelerates

* Brisk growth could fuel expectations of policy tightening

* Official China PMI March 55.1 vs 52.0 in Feb, f’cast 54.5

* HSBC/Markit China March PMI 57.0 vs 55.8

By Zhou Xin and Kevin Yao

BEIJING, April 1 (BestGrowthStock) – China’s vast manufacturing
sector moved up a gear in March as orders climbed, two business
surveys showed on Thursday, pointing to brisk first-quarter GDP
growth that could spur further policy tightening by Beijing.

The official purchasing managers’ index (PMI) rose to 55.1
in March from 52.0 in February, beating the median forecast of
54.5 in a Reuters poll of economists. [ID:nTOE62S02B]

Sub-indexes for output, new orders, new export orders,
imports and jobs all rose strongly, as did input prices,
highlighting mounting inflationary pressures as the economy
surges.

The headline PMI from a parallel HSBC/Markit survey rose to
57.0, the third-highest level in the six-year history of the
survey, from 55.8 in February. [ID:nBJL002017]

“Another substantially high headline manufacturing PMI
reading, combined with strong growth of exports, points to an
acceleration in industrial production and likely over 11
percent GDP growth in the first quarter,” Qu Hongbin, chief
economist for China at HSBC, said in a statement.

“With inflation pressures rapidly accumulating, this
increases the risk of interest rate hikes in the coming
months,” Qu said.

China’s central bank is expected to raise policy rates in
the second quarter and once more by early 2011, in addition to
more modest tightening measures such as further increases in
banks’ required reserves, according to a Reuters survey last
week. [ID:nTOE62O075]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

To see a graphic on China’s PMI trends, click:
http://graphics.thomsonreuters.com/10/04/CN_PMI0410.gif

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

A government researcher said earlier this week that China’s
annual growth would reach 12 percent in the first quarter,
accelerating from 10.7 percent in the fourth quarter last year.
[ID:nTOE62S003]

Gross domestic product figures for the January-March
quarter, which will be flattered by a low base of comparison in
2009 due to the global downturn, are due for release on April
15.

Strong demand from China, the world’s third-largest
economy, is proving a boon for its neighbours as consumption in
Asia’s major Western export markets remains weak.

South Korea on Thursday reported that exports in March rose
35.1 percent from a year earlier, surpassing forecasts of a
32.9 percent increase. [ID:nTOE62T0AB]

“Taking into account that our main trading partners are
China and other emerging markets and those markets are still
flourishing, we can expect a positive outlook for the first
half of the year,” said Kim Jae-Eun, an economist at Hyundai
Securities in Seoul.

UNDERLYING STRENGTH

Markets showed little reaction to the PMIs, which are
designed to provide a timely snapshot of business conditions.
The Australian dollar (AUD=D4: ), which is sensitive to the
Chinese economy because of its voracious demand for
commodities, was barely changed.

“The rise in the official PMI is at least partially
seasonal as the index tends to rise significantly in March,”
said Yu Song and Helen Qiao with Goldman Sachs.

“Having said that, we believe the underlying industrial
activity growth remains strong amid the abundant money and
credit supply domestically and continued strength in external
demand,” they said in a note to clients.

Dollar/yuan one-year non-deliverable forwards (CNY1YNDFOR=: )
were bid at 6.6555 compared with 6.6600 late on Wednesday,
indicating that some investors are betting the Chinese currency
(CNY=CFXS: ) will gain 2.56 percent in the next 12 months.

Seventeen out of 20 industry PMIs in the official survey
were above the boom-bust mark of 50, and the headline index was
well above the record low of 38.8 plumbed in November 2008.

But in a comment for the China Federation of Logistics and
Purchasing (CFLP), which carries out the survey for the
National Bureau of Statistics, government economist Zhang Liqun
said time would tell whether the improvement could be
sustained.

“From the demand side, the strong recovery in exports might
not be sustainable and actual investment growth is slowing. So
the outlook for growth in demand and orders is still not
clear,” Zhang said.

Markit, the British research firm that compiles the HSBC
PMI, said its survey pointed to a significant improvement in
operating conditions in the manufacturing sector.

Output, new orders and job creation all picked up. New
export orders last month expanded at the fastest pace in five
years as the sub-index inched up to 58.35 in March from 58.27
in February.

Stock Investing

(Additional reporting by Langi Chiang in Beijing; Writing by
Alan Wheatley; Editing by Ken Wills & Kim Coghill)

WRAPUP 1-Chinese manufacturing picks up as orders flood in