Asia's factories end 2019 with brighter outlook led by China

[SINGAPORE] Asia's manufacturing industry finished 2019 with a modestly brighter outlook, with fewer economies signalling contraction at factories.

Purchasing manager indices (PMIs) for South Korea, Thailand and Taiwan all moved above 50 in December, data from IHS Markit showed on Thursday. Malaysia improved right to the dividing line between expansion and contraction of 50, while Indonesia stayed slightly below it.

"PMIs seem to have improved across the board in December and sentiment is likely to improve further following the positive developments on the trade front," said Priyanka Kishore of Oxford Economics in Singapore.

The regional readings come as China's manufacturing sector continued to expand output in December, bolstering views that the world's second-largest economy is stabilising. China's official manufacturing PMI remained at 50.2 and a sub-index of new orders for export rose into expansion for the first time since May 2018.

The Caixin Media and IHS Markit PMI showed China's manufacturing index edged down to 51.5 in December from 51.8 in November.

"2019 was so bad, we are going to have a cyclical recovery," Xia Le, Hong Kong-based chief Asia economist at Banco Bilbao Vizcaya Argentaria SA told Bloomberg Television. "We can expect a cyclical recovery led by the exports sector and the manufacturing sector in the region."

South Korea's manufacturers - often viewed as a key barometer of global demand - enjoyed the strongest performance since April with both output and new orders pushing into positive territory for the first time since October 2018.

Global manufacturing has recovered somewhat from a mid-2019 slump as the impact of higher tariffs impact waned and as signs of a nascent rebound in the electronics sector emerged, which is especially critical to Asia's export engines. US President Donald Trump said he will sign the first phase of a trade deal with China on Jan 15, sealing an agreement that sees the Asian nation raising purchases of American farm goods in exchange for lower tariffs on some of its products.

"Survey data showed that businesses anticipate 2020 to be more positive, as signalled by higher input purchasing and stockpiling," Joe Hayes, an economist at IHS Markit said in a statement. "Key to the reversal of the negative trend seen through most of 2019 seems to be new product launches, particularly in the automotive and electronic sectors."

BLOOMBERG