China HSBC flash PMI hits seven month high in Oct

BEIJING (Reuters) - Strong new orders drove the fastest expansion in China's manufacturing sector in seven months in October, a preliminary survey showed on Thursday, more evidence that the economy is stabilising although a strong rebound remains elusive.

The flash PMI figure, the earliest reading of China's monthly economic performance, offers some positive news after disappointing export figures and September's manufacturing PMI, which had shown weak domestic demand.

The flash Markit/HSBC Purchasing Managers Index (PMI) stood at 50.9 in October, above September's final reading of 50.2 and marking a seven-month high. Ten of 11 sub-indices rose.

"China's growth recovery is becoming consolidated into the fourth quarter following the bottoming out in the third quarter" said Qu Hongbin an HSBC economist in a statement.

"This momentum is likely to continue in the coming months, creating favourable conditions for speeding up structural reforms."

New orders rose to 51.6, the highest in seven months and well above the 50 line separating expansion from contraction.

The strong reading lifted Chinese stocks off two-week lows, although investors are jittery about a possible tightening by the central bank.

In the first nine months of the year, the $8.5 trillion economy grew 7.7 percent from a year earlier, putting it on track to achieve Beijing's 2013 target of 7.5 percent, which would be the weakest growth in 23 years.

Still, many economists see growth slowing ahead as global demand remains soft and as Beijing restructures the economy towards one driven more by consumer demand than investment and credit.

The government has repeatedly stated it will accept slower growth during the restructuring, but policymakers have also shown a willingness to step in to keep growth stable.

The flash PMI showed new export orders ticked up only marginally, suggesting a stabilisation in global demand but no solid rebound.

Exports unexpectedly fell 0.3 percent in September, as fears of a tapering in U.S. monetary stimulus weighed on demand from Southeast Asia. Exports were a drag on the economy in the first three quarters, subtracting 1.

Policymakers stated they would support the trade sector if it looked like missing an 8 percent growth target for this year.

(Reporting By Natalie Thomas; Editing by Kim Coghill and John Mair)