(Bloomberg) --
Asia's factory hubs remained in the doldrums in October despite anticipation that the U.S. and China are moving toward an interim trade agreement.
Purchasing manager indexes for South Korea, Japan, Malaysia and Indonesia remained in contraction territory while Taiwan also moved below 50, the dividing line between contraction and expansion.
Even Vietnam, which has been more resilient than many of its peers, slid to the dividing line. Thailand joined Vietnam at 50, having stayed close to the dividing line for much of this year.
China's Caixin index -- which is more weighted toward private manufacturing companies -- rose to 51.7 from 51.4, but an official gauge released Thursday dropped to its lowest level since February.
“The headwinds for global growth, including China, continue to be a challenge,” Johanna Chua, chief Asia Pacific economist at Citigroup Inc., told Bloomberg Television.
The protracted slowdown comes against a backdrop of the slowest global growth in a decade, as rising protectionism and weakening demand takes its toll on business confidence across Asia.
South Korean exports, a bellwether for global trade, plunged again in October. Shipments fell 15% from a year earlier, pushed down by a slide in semiconductor and petrochemical shipments. Imports also fell 15%.
Much will depend on how the U.S.-China trade talks play out. The two governments had flagged progress toward an initial agreement to be signed at the Asia-Pacific Economic Cooperation summit later this month, but Chile's decision to cancel the event amid social unrest has raised doubts about when a deal will be inked.
In a tweet Thursday, U.S. President Donald Donald Trump said officials are searching for a new location for him and Chinese President Xi Jinping to sign the deal, which he said would be “about 60% of total deal.” At the same time, Chinese officials are casting doubts about reaching a comprehensive agreement.
China Said to Doubt Long-Term Trade Deal Possible With Trump
Asian central banks from India to South Korea have loosened monetary policy this year to help offset the trade slump. The U.S. Federal Reserve's signal this week of a policy pause after three rate cuts may give them reason to be more cautious going forward.
What Bloomberg's Economists Say
“Policy support is likely to continue across the region, though we may see a pause in monetary easing through year-end in some economies as central banks take stock of the measures in place.”
Chang Shu, chief Asia economist
Reaching an agreement will be critical for corporate sentiment, according to Rob Carnell, chief economist for Asia Pacific at ING Groep NV in Singapore.
“The trade war, geopolitics are the single biggest driver of financial markets and what corporate decision makers are using to decide whether or not to do things,” he told Bloomberg Television.
He warned that the weakness in manufacturing PMIs signals the services sector will be next.
“You look at what's happening to manufacturing and you just stick a big lag in, and that's typically where non-manufacturing is going to go.”
To contact the reporters on this story: Enda Curran in hong kong at ecurran8@bloomberg.net;Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold
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