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BW Businessworld

China, India Manufacturers Help Emerging Market Biz

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Business activity in emerging markets grew at the fastest rate in eight months in November, supported by momentum in Chinese manufacturing activity, a survey showed.

The composite HSBC emerging markets index ticked up to 52.1 from 51.7 in October, moving further above the 50 line that divides expansions in activity from contractions even though growth in the services sector stalled at October's seven-month high.

Manufacturers picked up the slack, led by China, where stronger domestic demand drove manufacturing growth to its sharpest increase since March, and also helped by India.

"In India, manufacturing business conditions are turning to positive after a few months of contraction," said Murat Ulgen, an emerging markets economist at HSBC.

"China is a huge weight, India is a huge country and has returned to (manufacturing) growth."

Other emerging markets also saw faster growth in manufacturing, with Central and Eastern Europe and Turkey benefiting from the euro zone's ongoing recovery.

But the manufacturers' index was dragged down by slowing growth in Brazil, Russia and South Korea and by a contraction in Indonesia.

Overall, the HSBC index showed only modest growth in the services and manufacturing composite, and November's figure remains below the long-term trend level of 54.0.

Despite returning to manufacturing growth, India's large but challenged economy weighed on the index, with a fifth month of overall contraction.

Its private sector output also contracted for the fifth straight month, but at a slower rate than in previous months.

"For India, the whole picture including services is still contracting," Ulgen said.

Despite a potentially challenging year ahead, manufacturing sentiment strengthened in most of the countries, with business outlooks in Brazil, Indonesia and the Czech Republic reaching record highs.

The HSBC survey collects data from purchasing managers at about 8,000 firms in 17 countries. The index is calculated using data produced by Markit.

(Reuters)