Stocks in China and the Australian dollar lost ground on Wednesday after Chinese manufacturing data showed a further slowdown in factory activity.
HSBC's preliminary China purchasing managers' index for July was the main data point slated for Asia for the day and was out soon after Hong Kong started trading. The number was 47.7?lower than the final score of 48.2 in June and an 11-month low. A score above 50 indicates rising factory activity while a score below 50 signals a contraction.
Stocks weakened soon after the data was released, with some markets falling into negative territory. These losses moderated as the session progressed however.
"The poor print on Chinese manufacturing applied the brakes to equity market momentum today, with traders again given a further reminder that all is not well in the world's second largest economy," said Tim Waterer, senior trader at CMC Markets.
"The move lower by risk assets may have been more severe had it not been for the pro-stimulus tone emanating from Beijing over the last several days," Mr. Waterer added.
The Shanghai Composite in mainland China fell 0.5% to 2033.33, while the Hang Seng Index shrugged off its earlier weakness to make a 0.2% gain to 21968.93.
Financials struggled in Shanghai as investors fretted over a glut in bank shares after China Merchants Bank said it has got approval from the securities regulator to raise 35 billion yuan ($5.7 billion) through a rights issue in Shanghai and Hong Kong. The bank lost 1.5%--in line with a broad fall in Chinese banks as the China Shanghai Financials index lost 1.8%.
Analysts also expressed concerns that the approval given by the China Securities Regulatory Commission would mark the beginning of a new round of fundraising activities by banks as they need fresh capital to fend off risks arising from the government's deregulation of the financial market.
"This is bad news for stock investors, as the rights issue will pose a great challenge to liquidity conditions," said Amy Lin, an analyst at Capital Securities.
In Sydney, the S&P/ASX 200 trimmed earlier gains to end 0.4% higher at 5035.10, while the Australian dollar dropped to US$0.9206 following the China PMI data from US$0.9304 earlier in the session.
In recent months, this early economic indicator for China has led to substantial market moves as it pointed to a contraction in the manufacturing sector.
China stocks rallied on Tuesday with the Hang Seng China Enterprises index rising 3.9% in Hong Kong owing to renewed expectations that Beijing has a 7% floor for economic growth. The further contraction in manufacturing caused China to give up some of those gains.
Companies related to Apple were in focus on Wednesday after the U.S. technology company late on Tuesday posted earnings that beat expectations. Apple's stock rose in after-hours trading in New York and its regional suppliers and assemblers followed it higher.
LG Display was up 2.4% in Seoul while Foster Electric Co. and Ibiden Co. were up 1.8% and 2% respectively in Japan. Hon Hai Precision Industry Co. rose 1.4% in Taiwan.
Japanese stocks fell in spite of softness in the yen. The Nikkei Stock Average fell 0.3% to 14731.28 while the dollar was at ?99.99 late in Asia compared with ?99.43 late on Tuesday in New York.
Also in Tokyo, technology company Advantest Corp. was 0.9% lower after a Nikkei report the company is expected to report a group operating loss of nearly ?3 billion for the April-to-June quarter owing to a drop in shipments of its chip-testing devices.
South Korea's Kospi Composite was up 0.4% to 1912.08.
Write to Daniel Inman at daniel.inman@wsj.com
Corrections & Amplifications
HSBC's preliminary China purchasing managers' index data was for the month of July. An earlier version of this article incorrectly said it was for June.
Source: http://online.wsj.com/article/SB10001424127887323829104578624533594665870.html?mod=rss_world_markets
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