Asian Shares Mostly Lower On China Data

Asia markets declined on Monday after data showed Chinese manufacturing activity improved in April but remained in contraction kicked off a week that will see policy decisions from the U.S. and Japan.

Hong Kong’s Hang Seng Index (HK:HIS) -1.76% traded down 0.8%, China’s Shanghai Composite (CN:000001) -0.76% dropped 0.6%, Australia’s S&P/ASX 200 index (AU:XJO) -0.32% fell 0.3%, Japan’s Nikkei Stock Average (JP:100000018) -0.20% lost 0.2%, and South Korea’s Kospi (KR:SEU) -0.10% slipped 0.1%.

HSBC’s preliminary “flash” reading of its China manufacturing Purchasing Managers’ Index out Monday showed that China’s manufacturing activity improved in April from levels seen in March but remained below 50 — which indicates contraction.

The improvement in factory conditions in April “suggests that the earlier easing measures [from Beijing] have started to work and hence should ease concerns of a sharp growth slowdown,” said Hongbin Qu, chief economist for China at HSBC.

Andrew Sullivan, principal sales trader at Piper Jaffray, said that investors were cautious ahead of key events this week including the Federal Open Market Committee meeting and the Bank of Japan policy meeting as well as after the weekend’s French election.

“People are worried…because if [Hollande] beats Sarkozy, he’s going to look to renegotiate a lot of the treaties France has signed up to. The European problem hasn’t gone away,” he said

Property firms were notable decliners in Hong Kong. Agile Property Holdings Ltd. (HK:3383) -3.74% dropped 2.2% and China Overseas Land & Investment Ltd. (HK:688) -2.34% lost 1.4%, while Poly Real Estate Group Co. (CN:600048) -1.64% and Gemdale Corp. (CN:600383) -2.87% each sank 3% in mainland China.

Financial firms were also weak, with China Life Insurance Co. (HK:2628) -2.82% LFC +0.52% down 1.4% and Ping An Insurance Group Co. of China Ltd.(HK:2318) -3.13% PNGAY +0.92% off by 1.6%.

Shares of heavyweight China Mobile Ltd. CHL +1.38% (HK:941) -3.55% lost 2% after the company reported only a modest increase in first-quarter profit on Friday.

Retail sector losses dragged in Tokyo. Shares in index heavyweight Fast Retailing Co.(JP:9983) -2.85% FRCOY +0.10% tumbled 2.9%, while J. Front Retailing Co. (JP:3086) -1.17% fell 1.2%.

Nikon Corp. (JP:7731) -1.79% NINOY +0.43% lost 1.8%, Nissan Motor Corp. (JP:7201) -0.95% NSANY +0.73% gave up 1% and Panasonic Corp. PC -0.39% (JP:6752) -0.78% eased 0.8%.

Shares in Canon Inc. (JP:7751) +0.66% CAJ +0.24% outperformed, rising 0.7%, after a Nikkei business daily report said that full-year operating profit is expected to swell by 20% following strong sales of single-lens reflex cameras.

Also moving higher, Yakult Honsha Co. (JP:2267) +11.70% shot up 11.7% after a weekend Nikkei newspaper report that French food company Group Danone SA (FR:BN) +2.78% DANOY -4.31% is seeking to raise its stake in the Japanese drink maker.

In Seoul, firms in the key shipping sector lost ground. Daewoo Shipbuilding & Marine Engineering sagged 3% and Samsung Engineering Co. SSNLF +25.39% pulled back 1.1%.

Commodity-linked firms were notable decliners in Sydney. Gold miner Newcrest Mining Ltd. (AU:NCM) -1.60% NCMGF +0.24% traded down 1.6%, and Cockatoo Coal Ltd.(AU:COK) -7.25% CKATF +3.90% dropped 7.3% after it announced that it won’t get a planned cash injection from SK Networks.

On the upside, steel makers advanced across the region. JFE Holdings Inc.(JP:5411) +2.57% rose 1.7%, and Nippon Steel Corp. (JP:5401) 0.00% NISTY -0.74% firmed 0.5% in Tokyo, while shares of Posco PKX +1.07% jumped 2.3% in Seoul, and Bluescope Steel Ltd. (AU:BSL) +1.27% BLSFY +1.55% added 1.3% in Sydney.

The moves came despite JFE’s first-ever annual net loss and a 42% profit drop for Posco, both announced Friday.

Strategists at Barclays Capital recommend exposure to Asia’s steel sector, “with first signs of a modest demand recovery in China and un-demanding valuations.” They named Posco as their top pick for the steel space.

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