HSBC PMI shows economy is stabilizing

China's manufacturing activity in private and export-oriented firms rebounded in May but was weaker than the preliminary reading of the HSBC Purchasing Managers' Index, which was released on Tuesday morning.

The index stood at 49.4 last month compared to 48.1 in April, but it was revised down from the flash reading of 49.7 on May 22, according to HSBC Holdings Plc and research company Markit.

A reading below 50 means contraction. The May reading was the index's fifth successive monthly drop.

Qu Hongbin, chief economist for China at HSBC, said new orders stabilized while new export orders recorded an impressive rise to 53.2.

"The final PMI reading for May confirmed the economy is stabilizing, but it is too early to say it has bottomed out, particularly in light of a weaker property sector," Qu said. "The lack of sustainable growth momentum warrants stronger policy support."

Qu said he expected both monetary and fiscal policies to be loosened gradually in coming months.

The components showed production contracted at a fractional pace while new orders stabilized after three months of declines. May also had the biggest loss in jobs in three months.

The official PMI, unveiled on Saturday, rose to a five-month high of 50.8 in May from 50.4 in April, according to the China Federation of Logistics and Purchasing. The official PMI is weighted toward state-owned manufacturers.