Global Markets News

Asian manufacturing buoyed by tech as focus shifts to regional rate hikes

HONG KONG (Reuters) - Asia’s major manufacturing economies saw their fastest expansion in factory activity in years last month, driven by robust demand for electronics and firming the case for central banks in the region to shift to tighter monetary policy next year.

A raft of mostly strong factory activity surveys released on Friday comes a day after the Bank of Korea became the first major central bank in Asia in three years to raise interest rates.

The tightening marks a potential turning point for the region with Malaysia and the Philippines among central banks that could lift rates next year.

The firm expansion in factory activity, seen in South Korea, Japan and Taiwan, has not been uniform, however, with Beijing’s war on pollution tempering growth in Chinese manufacturing in October.

Analysts expect any tightening by Asian central banks to be gradual and follow the lead in the United States, which is expected to hike again in December and three more times in 2018. U.S. and euro zone manufacturing surveys later on Friday are expected to show even higher growth rates than in Asia.

“We’re seeing the strong momentum in the third quarter carrying over in the fourth,” said Khoon Goh, head of Asia research at ANZ.

“The improving global backdrop ... suggests that central banks in this region will start policy normalisation. It’s important to note this is not the start of an outright tightening cycle, this is the removal of very accommodative policies.”

Elsewhere in Asia, India saw gross domestic product growth rebound in the three months to September, in a sign businesses are recovering from disruptions caused by the launch of a national sales tax and a shock ban on high-value banknotes.