China HSBC flash PMI hits a seven-month high

China growth momentum still strong: Societe Generale
China growth momentum still strong: Societe Generale

China's manufacturing activity expanded in October thanks to rising new orders, a survey from HSBC showed on Thursday.

The HSBC flash Purchasing Managers' Index (PMI) stood at a seven-month high of 50.9 in October, up from 50.2 in September and above the key 50-mark which separates expansion from contraction.

The survey is the first snapshot of how manufacturing in the world's second-largest economy is faring this month. New orders rose to 51.6, the highest in seven months.

"October's HSBC flash China manufacturing PMI rose to a seven-month high of 50.9 on the back of broad-based modest improvements," said Hongbin Qu, chief economist for China and co-head of Asian economic research at HSBC.

(Read more: China unlikely tosee a repeat of June cash crunch)

"This implies that China's growth recovery is becoming consolidated into the fourth quarter following the bottoming out in the third quarter. This momentum is likely to continue in the coming months, creating favorable conditions for speeding up structural reforms," he said.

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Last month, the final HSBC PMI reading came in at 50.2 – significantly below the flash estimate of 51.2.

"It seems there is still some growth momentum there, but the HSBC PMI has been quite volatile," Societe Generale China Economist Yao Wei told CNBC. "If you can recall, the last flash [PMI] was quite good, but the final reading wasn't good, so we need to see more data to confirm things are on a trend."

The October number offers some positive news amid concerns about the strength of a recovery in China's economy. China's exports, for instance, fell a 0.3 percent in September from a year earlier against expectations for a rise.

(Read more: Is inflation a new risk for China's economy?)

"For this year, to reach the 7.5 percent [growth] target is not going to be a problem," said Wei. China's government has a full-year growth target of 7.5 percent.

Many economists expect growth momentum in China will slow in the fourth quarter as the temporary boost from the government's stimulus measures unveiled in late-July peters out.

Asian equity markets pared losses after the upbeat PMI data from China, although concerns about tight Chinese liquidity conditions weighed on sentiment.

The Australian dollar also edged higher against the U.S. dollar as investors bet that better economic data out of China, a key trading partner for Australia, would boost the outlook for Australia's economy.

"The PMI data has alleviated some concerns about China and that's why we've seen some gains today in currencies such as the Aussie dollar," said Hamish Pepper, forex strategist for Asia-Pacific at Barclays Capital.