Asian Manufacturing Expands, Lifted by Regional Demand
--South Korea, Taiwan and Indonesia manufacturing pick up in March
--China also improves, but less than expected
--Weak South Korean March trade figures prompt calls for a rate cut
SINGAPORE--Manufacturing in Asia picked up the pace in March, helped by an expansion in China and firmer domestic demand in some Asian economies, but weak trade figures from South Korea raised some caution about the outlook.
Purchasing managers surveys Monday showed manufacturing expanding briskly in South Korea, Taiwan and Indonesia. Signals from Asia's two largest economies, however, weren't as upbeat. In China, manufacturing gained less than predicted, while in Japan, business sentiment brightened but not as much as the market had hoped for. Weaker-than-expected Korean exports also signalled the trade-dependent region isn't in the clear.
"It paints a story of modest recovery rather than an all-out, straight line all-guns-blazing story, which would have pleased the market more," said CIMB head of research Song Seng Wun.
China's official purchasing managers index for March registered 50.9, up from 50.1 in February. That was lower than a 51.0 expansion forecast for March by economists. A separate gauge of China's manufacturing sector from HSBC rose to 51.6 in March from 50.4 in the previous month. A reading above 50 indicates an expansion; a reading below signals contraction.
Indonesia manufacturing expanded on the back of surging new orders, even though new export orders expanded only modestly. HSBC's manufacturing PMI rose to 51.3 from 50.5 in February. "The sector remains well supported by strong domestic demand, and exports should provide a second source of demand later this year," wrote HSBC economist Su Sian Lim.
Taiwan manufacturing likewise improved, with HSBC's PMI rising to 51.2 from 50.2 in February, with local and export orders rising.
Vietnam manufacturing expanded at its fastest rate in nearly two years, driven by higher export demand from customers in China, Japan and Thailand. HSBC's manufacturing PMI increased to 50.8 in March, compared to 48.3 in February.
Daniel Martin, Asia economist at Capital Economics, said loose monetary policies by Asian central banks have bolstered domestic demand, fueling higher consumption of locally-produced goods and intra-regional Asian exports.
"For the past several months, it has been the developing world that has been supporting Asian exports. The region is dragging itself along," he said.
In Korea, manufacturing activity expanded at the strongest pace in a year, with the HSBC PMI measuring 52.0, compared with 50.9 in February.
But Korean trade in March was much weaker than expected, prompting some economists to predict the Bank of Korea will lower its policy rate, in addition to fiscal stimulus the government is planning to put in place.
Korean exports--a leading indicator of export trends for the region--rose 0.4% from a year earlier in March, weaker than a 2.8% median increase forecast in a survey of economists by Dow Jones Newswires. Imports fell 2%.
ANZ senior economist Raymond Yeung said the economic situation in Korea warrants a policy response "to prevent the current feebleness from further deepening." Mr. Yeung expect the Bank of Korea to cut interest rates by a quarter percentage point in April.
Meanwhile, the Bank of Japan's tankan survey disappointed market-watchers. The survey's large manufacturers' business sentiment index improved to minus 8 in the first three months of the year, slightly worse than economists' expectations for a minus 7 reading, compared with minus 12 in the three months ending in December.
--Leslie Shaffer contributed to this article.
Write to Martin Vaughan at martin.vaughan@dowjones.com
--South Korea, Taiwan and Indonesia manufacturing pick up in March
--China also improves, but less than expected
--Weak South Korean March trade figures prompt calls for a rate cut
SINGAPORE--Manufacturing in Asia picked up the pace in March, helped by an expansion in China and firmer domestic demand in some Asian economies, but weak trade figures from South Korea raised some caution about the outlook.
Purchasing managers surveys Monday showed manufacturing expanding briskly in South Korea, Taiwan and Indonesia. Signals from Asia's two largest economies, however, weren't as upbeat. In China, manufacturing gained less than predicted, while in Japan, business sentiment brightened but not as much as the market had hoped for. Weaker-than-expected Korean exports also signalled the trade-dependent region isn't in the clear.
"It paints a story of modest recovery rather than an all-out, straight line all-guns-blazing story, which would have pleased the market more," said CIMB head of research Song Seng Wun.
China's official purchasing managers index for March registered 50.9, up from 50.1 in February. That was lower than a 51.0 expansion forecast for March by economists. A separate gauge of China's manufacturing sector from HSBC rose to 51.6 in March from 50.4 in the previous month. A reading above 50 indicates an expansion; a reading below signals contraction.
Indonesia manufacturing expanded on the back of surging new orders, even though new export orders expanded only modestly. HSBC's manufacturing PMI rose to 51.3 from 50.5 in February. "The sector remains well supported by strong domestic demand, and exports should provide a second source of demand later this year," wrote HSBC economist Su Sian Lim.
Taiwan manufacturing likewise improved, with HSBC's PMI rising to 51.2 from 50.2 in February, with local and export orders rising.
Vietnam manufacturing expanded at its fastest rate in nearly two years, driven by higher export demand from customers in China, Japan and Thailand. HSBC's manufacturing PMI increased to 50.8 in March, compared to 48.3 in February.
Daniel Martin, Asia economist at Capital Economics, said loose monetary policies by Asian central banks have bolstered domestic demand, fueling higher consumption of locally-produced goods and intra-regional Asian exports.
"For the past several months, it has been the developing world that has been supporting Asian exports. The region is dragging itself along," he said.
In Korea, manufacturing activity expanded at the strongest pace in a year, with the HSBC PMI measuring 52.0, compared with 50.9 in February.
But Korean trade in March was much weaker than expected, prompting some economists to predict the Bank of Korea will lower its policy rate, in addition to fiscal stimulus the government is planning to put in place.
Korean exports--a leading indicator of export trends for the region--rose 0.4% from a year earlier in March, weaker than a 2.8% median increase forecast in a survey of economists by Dow Jones Newswires. Imports fell 2%.
ANZ senior economist Raymond Yeung said the economic situation in Korea warrants a policy response "to prevent the current feebleness from further deepening." Mr. Yeung expect the Bank of Korea to cut interest rates by a quarter percentage point in April.
Meanwhile, the Bank of Japan's tankan survey disappointed market-watchers. The survey's large manufacturers' business sentiment index improved to minus 8 in the first three months of the year, slightly worse than economists' expectations for a minus 7 reading, compared with minus 12 in the three months ending in December.
--Leslie Shaffer contributed to this article.
Write to Martin Vaughan at martin.vaughan@dowjones.com
