By Chao Deng
Asia shares dropped Monday amid jitters about weakening Chinese
manufacturing data and the continued declines in commodity
prices.
The Shanghai Composite slipped 1.1% to 3622.63, while the
smaller Shenzhen Composite traded down 1.4% at 2080.78. Hong Kong's
Hang Seng Index slid 0.7% to 24461.7.
The Caixin China manufacturing purchasing managers' index, a
gauge of nationwide manufacturing activity, fell to a two-year low
of 47.8 in July, compared with 49.4 in June, Caixin Media Co. and
research firm Markit said Monday.
"July data signaled that the downturn in China's manufacturing
sector intensified at the start of the third quarter," Caixin said
in a statement. "Renewed falls in both total new work and new
export orders led manufacturers to cut production at the fastest
rate since November 2011."
The final reading was lower than the Caixin preliminary July PMI
of 48.2 and the official manufacturing PMI, released Saturday. That
reading fell to 50.0 in July from 50.2 in June, according to the
National Bureau of Statistics.
Saturday's data was disappointing given that "the official PMI
bottomed in January and had been grinding higher," Tim Condon, a
strategist at ING, wrote in a report. Still he added, "We believe
the stock market panic in early July chilled economic activity,
which is what the manufacturing PMIs picked up. The authorities
quelled the panic, which we think will make the PMI plunges
transitory."
In July, the Shanghai Composite suffered its worst month in
nearly six years, revealing a receding confidence in Beijing's
ability to stem a selloff that began in mid-June. The Shanghai
Composite Index lost 14% in July, including 1.1% on Friday.
The latest measures by Chinese regulators to stem selling
include an investigation into suspicious activity of trading on the
mainland. China's securities regulator said Friday that it has
launched a probe into automated trading and has restricted 24 stock
accounts suspected of influencing stock prices. The government
didn't name any of the parties behind the restricted stock
accounts, but U.S.-based hedge fund Citadel LLC said trading in one
of the accounts it manages in China has been suspended.
Elsewhere, Australia's S&P ASX 200 lost 0.4%, the Nikkei
Stock Average was down 0.5% and South Korea's Kospi slid 0.8%.
"The biggest question for the month is whether we give back the
gains from July," IG market strategist Evan Lucas said of
Australia's market. This week sees Australia's earnings season
begin in earnest, with companies including Suncorp Group Ltd.,
Virgin Australian Holdings Ltd., and Rio Tinto Ltd. all set to turn
in numbers. The ASX 200 climbed 4.4% last month, the first monthly
rise since February.
The share declines in Japan came even as the yen weakened. The
currency last traded at 123.994 from 123.92 late Friday in
Asia.
A softer yen, in addition to the benefits of growing North
American demand and higher spending by foreign tourists, however,
has helped Japanese corporates, which have so far reported robust
profit growth in the April-June quarter. Of the 596 nonfinancial
companies closing their books in March that reported earnings by
the end of July, 70% saw pretax profit increases on the year.
Hiroyuki Fukunaga, CEO at Investrust, said Japan stocks are
likely to continue trading in lackluster fashion before anxiously
awaited U.S. jobs data is delivered on Friday.
"The U.S. Federal Reserve bank has been very reticent to declare
September as a definite 'go' time for raising interest rates; it
remains heavily data-reliant," he said. "Thus Friday's jobs data is
seen as critical to formulating the decision on timing. Investors
are expected to remain largely in a holding pattern this week as a
result."
In contrast with China, PMI data on Monday rebounded in South
Korea and Taiwan. But both readings were still in contraction
territory, coming in below the 50-level.
"It appears a global economic slowdown is likely to remain a
headwind to growth in the second half of the year, as panelists
mentioned softer demand in key export markets such as China, Europe
and the U.S.," Annabel Fiddes, an economist at Markit, said of
Taiwan.
The losses in the commodities markets Monday came after big oil
companies pulled the Dow Jones Industrial Average lower Friday, on
disappointing earnings reports and signs of increased U.S. oil
drilling.
Brent crude, already at multi-month lows, was last down 0.8% at
$51.77 in Asia trade. Gold declined 0.2%, or $1.90, to $1,093.20 an
ounce.
Write to Chao Deng at Chao.Deng@wsj.com