China January 'flash' PMI 48.8, shows contraction (by V. Phani Kumar)

HONG KONG (MarketWatch) -- Chinese manufacturing activity failed to grow in January, although the sector's contraction eased slightly, according to the initial findings of a closely watched survey released Friday by HSBC. The so-called flash China manufacturing Purchasing Managers' Index for January came in at 48.8, up from a final reading of 48.7 last month. The flash PMI reading however represented a three-month high, HSBC said. "Despite the upside surprise of industrial production growth in December, the ongoing slowdown of investment and exports implies more headwinds to growth and likely destocking pressures for manufacturers in the coming months. We expect more policy easing to stabilize growth," said Hongbin Qu, chief economist for China at HSBC. Hong Kong's Hang Seng Index (HK:HSI) , which had opened more than 1% higher, saw gains fade after the data, with the index briefly turning flat.