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 In China, the final Markit/HSBC Purchasing Managers' Index (PMI)
gauge of factory activity, fell to an eight-month low of 48.0 in
March. It has remained below the 50 level, which indicates
contraction, since January.
The official survey geared towards bigger, state-owned firms, showed
a marginal increase to 50.3 from 50.2, but economists warned that
given seasonal patterns this was a sign of further weakness rather
than improvement in the world's second-biggest economy.
In Japan, the closely watched central bank tankan survey showed
business sentiment barely improved in the three months to March and
was set to sour this quarter following an increase in sales tax that
took effect on Tuesday.
Investors are betting China will look to arrest the loss of momentum
after what has shaped up to be its worst quarter in five years, by
boosting or bringing forward spending on some infrastructure
projects. Japan's weakening corporate sentiment also helped keep
alive market expectations that the Bank of Japan (BOJ) will boost
its massive monetary stimulus in coming months to sustain recovery
in the world's third-largest economy.
"The final reading of the HSBC China Manufacturing PMI in March
confirmed the weakness of domestic demand conditions," said Hongbin
Qu, HSBC's chief China economist, in a statement accompanying the
survey.
"We expect Beijing to fine-tune policy sooner rather than later to
stabilize growth."
Expectations that Beijing will turn on the taps with government
funds and credit sent the MSCI's broadest index of Asia-Pacific
shares outside Japan to a four-month high.
Last week, China's Premier Li Keqiang said Beijing had the necessary
policies in place and would push ahead with infrastructure
investment, after recent weak economic data and mounting signs of
financial risks clouded the nation's outlook.
In Japan, the tax increase is taking a bigger toll on corporate
sentiment than the previous hike in 1997, highlighting the daunting
challenge facing Prime Minister Shinzo Abe in his quest to shore up
government revenues while rescuing the country from years of
deflationary stagnation.
The headline index for big manufacturers' sentiment rose by one
point to plus 17 compared with three months ago, the BOJ's closely
watched survey showed, marking the fifth straight quarter of
improvement, but slightly short of a median market forecast of plus
18.
But crucially, both big manufacturers and non-manufacturers in Japan
expect conditions to worsen in the three months ahead, the tankan
showed.
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Other data showed Japan's Markit/JMMA Japan Manufacturing Purchasing
Managers Index (PMI) fell to a seasonally adjusted 53.9 in March
from 55.5 in February, pulling back further from an eight-year high
set in January as heavy snow in some areas curbed production.
"The chance of further BOJ easing may have risen a bit but the
tankan alone won't be a trigger for action. The bank will probably
wait to see more evidence on how much the tax hike actually hurts
demand," said Yoshiki Shinke, chief economist at Dai-ichi Life
Research Institute.
Manufacturing PMI surveys for Asia's third and fifth-largest
economies India and Indonesia also came in softer, with India's
index still in growth territory, but off last month's highs and
Indonesia's hitting a seven-month low.
However, South Korea, Asia's fourth-largest economy and one of its
leading manufacturing and export powerhouses, managed to buck the
trend. It's HSBC/Markit manufacturing gauge rose to a seasonally
adjusted 50.4 in March from 49.8 in February.
Trade data for March, the first available from a major exporting
economy, showed the nation's exports rose by 5.2 percent in annual
terms, with shipments to the United States up 17 percent and those
to the European Union up 15.2 percent.
The data showed that in contrast to its bigger rivals China and
Japan, South Korea was more successful in tapping into a gradual
recovery in western hemisphere advanced economies.
The slowdown in China, South Korea's top export market, continued to
act as a drag, with exports there rising just 4.5 percent in annual
terms.
(Additional reporting by Tetsushi Kajimoto in Tokyo, Rieka Rahadiana
in Jakarta, Se Young Lee in Seoul, and Sarmista Sen in Bangalore;
writing by Swati Bhat; editing by Tomasz Janowski)
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