China manufacturing sector shows first growth since December

 
Billy Ehrenberg
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A rise in commodity prices is boosting the Australian mining sector with shares in Rio Tinto, Fortesque metals and BHP Billiton all up. (Source: Flickr, Robert Scoble)

The Chinese manufacturing sector grew in June for the first time in six months, according to a report from HSBC/Markit. The growth drove up the price of commodities, with iron ore and copper futures among the risers.

A rise in commodity prices is boosting the Australian mining sector, with shares in Rio Tinto, Fortesque Metals and BHP Billiton all up.

The HSBC/Markit flash purchasing managers' index (PMI) showed manufacturing growth had risen to 50.8, 0.8 points above the 50-point line that separates growth from contraction.

The results will go some way to placating fears of a Chinese hard landing; although the economy still faces risks from a shrinking housing market.

This month's numbers represent the first time since December that the sector has been in the ascendancy, with improvements constant across almost all 11 sub-indices included in the report. Last week the Chinese premier, Li Keqiang, claimed that the Chinese economy would avoid the hard landing many people fear and would continue to grow without a strong stimulus.

Hongbin Qu, chief economist for China and head of Asian economic research at HSBC, said:

The improvement was broad-based with both domestic orders and external demand sub-indices in expansionary territory. This month's improvement is consistent with data suggesting that the authorities' mini-stimulus are filtering through to the real economy. Over the next few months, infrastructure investments and related sectors will continue to support the recovery. We expect policy makers to continue their current path of accommodative policy stance until the recovery is sustained.

The good news did not prevent Hong Kong-traded Chinese stocks from showing a market drop, with the Hang Seng China Enterprises Index falling 1.9 per cent, representing its biggest fall since 4 February.

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