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China's official PMI seen edging up to 51.2 in October but still subdued

BEIJING (Reuters) - Growth in China's manufacturing sector likely picked up slightly in October as demand improved, a Reuters poll showed, offering some tentative signs that the world's second-biggest economy may be stabilising but at levels which are subdued.

The official manufacturing Purchasing Managers' Index (PMI) likely edged up to 51.2 in October from September's 51.1, the median estimate from 24 economists showed.

A reading above the 50-point level indicates an expansion in activity while one below that points to a contraction on a monthly basis. The survey will be released on Saturday.

The pick-up in activity may assure investors that the Chinese economy, which has stumbled this year, is not doing as badly as some had feared, though a roaring recovery is unlikely.

"Electricity generation and the property sales have picked up somewhat in the past three weeks, which could reduce the downside risks facing the economy," economists at ANZ Bank said in a note to clients.

"Overall, we see that China's growth momentum will only pick up modestly in the upcoming months as massive policy easing is unlikely," the ANZ economists said.

Hurt by unsteady exports, a housing downturn and cooling investment growth, the Chinese economy is in danger of missing the government's growth target of about 7.5 percent this year. Third-quarter growth of 7.3 percent was the weakest since the global financial crisis.

Most analysts believe authorities will continue to roll out modest support measures in coming months to lift activity, but they are divided over whether it would act more aggressively, such as by cutting interest rates, unless there is a risk of a sharper slowdown.

Instead, Premier Li Keqiang has stated repeatedly that authorities will tolerate growth slightly below the 2014 official target as long as the labour market remains healthy and as the government tries to reshape the economy so it is driven more by domestic consumption and less by exports and investment.

A preliminary PMI survey released last week by HSBC/Markit showed the manufacturing sector gained momentum in October, even though analysts said the figure did not point to a fourth-quarter turnaround in the economy.

The official PMI is focused on larger, state-owned factories, as opposed to the HSBC/Markit PMI which focuses more on smaller manufacturers in the private sector.

FORECAST

4CAST 51.3

Action Economics 51.2

ANZ 51.1

Bank of China 51.2

Barclays 51.4

BMO Capital Markets 51.1

China Minzu Securities 51.2

Citi 50.7

Commerzbank 51.0

Danske Bank 51.0

Essence Securities 51.4

Guangdong Development Bank 51.3

Guotai Junan Securities 51.3

Huarong Securities 51.3

Hwabao Trust 51.4

Industrial Bank 50.9

ING Financial Markets 51.3

JPMorgan 51.0

Minsheng Bank 51.2

Natixis 50.8

Shenyin & Wanguo 51.1

Societe Generale 51.3

Standard Chartered 51.1

UBS 51.2

Prior 51.1

Median 51.2

Highest 51.4

Lowest 50.7

No. Of Forecasts 24

(Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Kim Coghill)