China's manufacturing sector may have slipped into a contractionary phase in October following two months of expansion, according to Nomura.
The bank forecasts HSBC's flash Purchasing Managers' Index (PMI), which is due out on Thursday, slipped to 49.8 in October, below the key 50-mark which separates expansion from contraction. Last month, the final HSBC PMI reading came in at 50.2 – significantly below the flash estimate of 51.2.
"We think growth momentum has slowed in September as evidenced by the headline activity indicators such as exports and industrial production. The slowdown is due to weak demand and rising interest rates," Zhiwei Zhang, chief China economist at Nomura told CNBC, referring to the rise in three-year government bond yields, which have climbed to around 3.9 percent from 3 percent just four months ago.
(Read more: China's home price rises don't tell the whole story)