China factory activities slumped for the sixth consecutive month, albeit at a slower pace, data released Monday by HSBC Holdings PLC (NYSE: HBC) showed.
Disappointed investors moved out of riskier assets like stocks, pushing Asian market down on Monday, while hoping for additional easing measures from Beijing.
The HSBC Flash Purchasing Managers Index (PMI), a preliminary indicator of the operating conditions in the domestic manufacturing sector, the earliest indicator of China's industrial activity, rose in April to a two-month high of 49.1, compared to a final reading of 48.3 in March. A reading below 50 indicates contraction from the previous month, while anything above that indicates growth.
This suggests that the earlier easing measures have started to work and hence should ease concerns of a sharp growth slowdown, HSBC Chief Economist for China Qu Hongbin said in a statement.
In its latest policy-easing move, the People's Bank of China cut the reserve requirement rate for all commercial banks by 50 basis points for the second time in three months in February to boost economic activities.
That said, the pace of both output and demand growth remains at a low level in an historical context and the job market is under pressure, Qu said.
Overall new orders sub-index, which carries the heaviest weighting of the five components making up the overall PMI, rose to 48.9, from the four-month low seen in March.
HSBC's Flash PMI is based on responses from 85 percent to 90 percent of those surveyed in a given month, and usually provides a statistical first look at the sector for the month.
The Chinese economy expanded at the weakest pace in nearly three years in the first quarter. The gross domestic product expanded 8.1 percent in the first three month of 2012. Earlier in March, Beijing trimmed its 2012 GDP forecast for the world's second-largest economy to 7.5 percent.
This calls for additional easing measures in the coming months, Qu said. We expect monetary and fiscal easing to speed up in 2Q.
Hong Kong's Hang Seng Index dropped 1.84 percent to 20,624.39, China's Shanghai Composite fell 0.76 percent to 2,388.59 and Japan's Nikkei Stock Average lost 0.2 percent to 9,542.17.