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China Falls on PMI; Japan, Sydney Off Lows

Asian markets were mixed on Friday, with Japan closing higher and Australia clawing back from session lows, while Chinese shares edged down on news that manufacturing activity in the mainland declined in February.

South Korean financial markets were closed on Friday for a public holiday.

The Hang Seng Index closed down 0.6 percent, while shares in Shanghai lost 0.2 percent. Japan's Nikkei 225 rebounded from early falls and Australia's S&P ASX 200 trimmed its losses and closed within reach of multi-year highs.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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China PMI Impact

China's official Purchasing Managers' Index (PMI) slipped to 50.1 from January's 50.4. HSBC's final PMI, released separately, fell to 50.4 last month from a two-year high of 52.3 in January. Markets had anticipated a dip in the official PMI, while both readings remained above the 50-mark that signals expansionary activity.

"Right now we're in a relatively stronger position than last quarter. Both PMIs actually saw a typical Chinese New Year dip that was smaller than previously," said Donna Kwok, greater china economist at HSBC.

The weak data hurt Chinese basic materials stocks, with CITIC Pacific leading losses by over 6 percent.

U.S. fiscal woes also remained firmly in focus because of the sequester: $85 billion in budget cuts that take effect at midnight Friday unless lawmakers fail to reach an agreement to stop the cuts taking place.

(Read More: Why You May Suffer From the 'Sequester Blahs')

Japan Recovers

In Tokyo, a rally in real-estate stocks lifted the Nikkei out of negative territory, offsetting weakness in the export sector where firms with exposure to China were hit after the weak PMI data from the world's second-largest economy.

A Reuters report that several blue-chip firms were selling prime property to bolster balance sheets spurred a 7-percent rally in property stocks like Tokyo Tatemono.

Hopes of monetary easing in Japan also underpinned sentiment a day after the nomination of Haruhiko Kuroda as next Bank of Japan governor helped sparked a near-3 percent rally. Kuroda, a proponent of aggressive policy action, is expected to put into effect Prime Minister Shinzo Abe's radical economic policies - known as "Abenomics" - via increased asset purchases.

(Read More: 'Abenomics' Picks Up Speed With Kuroda Nomination)

Hopes of this expected stimulus have seen the yen lose about 15 percent of its value against the dollar since November and boost Japanese shares to their highest level in more than four years.

Hang Seng Slips

Property developer Sun Hung Kai weighed on Hong Kong stocks after the firm slipped nearly 2 percent on a conservative sales guidance.

Gold mining stocks were the biggest losers in Australia with Perseus Mining and Alacer Gold dropping between 4 to 5 percent after the yellow metal tumbled 1 percent.

Amid the out performers, Ten Network shares soared 9 percent on reports that the chairman of rival company Seven Group, Kerry Stokes, is set to acquire an almost 5 percent stake in Ten.

Investors are keeping an eye out for a possible rate cut from Australia's central bank as it meets this coming Tuesday. In the past, a stubbornly strong Australian dollar has been a principal factor behind the Reserve Bank of Australia's (RBA) decision to cut rates.

However, the currency has lost 1.6 percent of its value since the start of 2013 and hit a 4-month low around $1.0180 earlier this week, which may prompt the RBA to hold its fire. The Aussie was last trading at around $1.02.

Asian markets ended the month of February on a strong note, but experts warn that investors should not expect a risk-on environment as 2013 progresses.

"In reality, it is perhaps more a case of an impressive January and a consolidation in February, as political issues on both sides of the Atlantic keep equity investors in check," Jason Hughes of IG Markets said in a note.