Production remains weak in Vietnam, says HSBC

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Workers at a garment factory owned by Singaporeans outside Hanoi

A subdued domestic market and reduced global trade flows have continued to take a toll on manufacturing in Vietnam as production has fallen for the seventh month in a row this year, according to HSBC.

The manufacturing purchasing managers' index (PMI) released Wednesday by HSBC and Markit Economics fell to 48.7 in October from 49.2 the previous month, moving further away from the neutral 50 value.

The gauge covers around 400 companies. An index below 50 indicates a contraction.

HSBC noted that the rate of contraction remained marginal overall and if compared to July, it was "markedly slower."

"New orders and new export business both fell for the sixth consecutive month. The decline in new export orders was the steepest in the survey's history, as companies reported reduced demand from clients in China, Japan and Taiwan," the bank said in a statement.

Inventories of finished goods were broadly unchanged for the fourth straight month, it said, adding that average purchase prices rose for the third month in a row, reflecting higher costs for foodstuffs, fuels and transportation.

"Weak global and domestic demand continues to weigh on the manufacturing sector; new export orders contracted at the sharpest pace since the series began," said HSBC economist Trinh Nguyen.

"The rise of input costs did not help, as manufacturers could not pass off the costs to consumers due to sluggish demand. The output index level, although still signalling contraction, is stabilizing at close to fifty suggesting that the economy will likely recover towards the end of Q4."

Reuters reported Thursday that recent data from Asia was encouraging, with China's economy, the motor of global growth in recent years, appearing to have gathered speed in October. The reading of the Chinese HSBC PMI rose to 49.5 in October, the highest since February.

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