Sydney, Seoul shares lead Asia lower after China PMI disappoints
Asian stocks ended lower on Thursday after a preliminary reading of Chinese manufacturing activity fell to a six-month low, suggesting a slowdown in the world's second-largest economy.
HSBC's Flash Purchasing Managers' Index (PMI) for January came in at 49.6, down from last month's final reading of 50.5.
"There are probably some New Year distortions in here as it is right between the holidays, but it does suggest not all is well in China's economy. I wouldn't get my hopes up for a big, strong pick-up right after Chinese New Year. Interest rates are rising in China, we know the government is pursuing aggressive reforms; a strong pick-up is not in the cards for China," said Frederic Neumann, MD & Co-Head of Asian Economics Research at HSBC.
Shanghai down 0.5%
China's benchmark index fell after hitting a near two-week high in the previous session on the back of HSBC's disappointing PMI data. Larger losses were capped after the People's Bank of China injected its biggest weekly funding since February 2013 into interbank markets.
Investors also digested data that showed fiscal revenues rose an annual 10 percent in 2013.
Industrial and Commercial Bank of China fell 0.9 percent following reports that the Shanxi provincial government may help bail out investors in an investment product that was marketed by the lender.
In Hong Kong, the benchmark Hang Seng Index fell 1.5 percent to a more than one-week low.
Nikkei slips 0.8%
Japan's benchmark index reversed gains to close in negative territory after hitting a two-week high of 15,958 earlier in the session.
(Read more: Is the Japan story getting threadbare?)
Investors dismissed a Reuters poll that indicated business sentiment was set to improve for a third consecutive month in January, while Prime Minister Shinzo Abe's pledge to cut corporate taxes at the World Economic Forum on Wednesday also failed to lift sentiment.
Textile company Unitika was one of the biggest losers, down over 4 percent. But offsetting the losses, Japan Aviation Electronics surged 14 percent after raising its annual earnings forecast for the second time this fiscal year.
Australia loses 1%
Australia's benchmark S&P ASX 200 index fell to a one-week low following China's disappointing data, while the Australian dollar briefly fell below 88 U.S. cents to near Monday's three-and-a-half year low of $0.8756.
Banks and resource stocks led the declines. Australia New Zealand Banking, Commonwealth Bank of Australia and Westpac fell over 1 percent each while BHP Billiton lost 1.5 percent on the back of lower copper prices.
Gold miners Evolution Mining and Alacer Gold tumbled 7 and 5 percent respectively, after gold prices hit a two-week low.
Whitehaven Coal fell 1.8 percent after announcing that it expects a drop in coal prices this quarter.
Kospi falls 1.2%
South Korean shares fell as caution over corporate earnings overshadowed optimism from a weaker currency and upbeat economic data.
Samsung lost 2 percent ahead of releasing earnings on Friday while Hyundai Motor also fell 2 percent after its quarterly revenue fell for the first time in three years. Kia Motors rose 0.3 percent ahead of posting results on Friday.
Meanwhile, the won hit its weakest level in more than two months while advanced fourth quarter gross domestic product (GDP) came in line with expectations.
Emerging markets mixed
Thai shares gained 0.6 percent following a weaker baht which stood at a one-week high of 32.9 against the dollar. Indian stocks were flat one day after closing at record highs.
(Read more: Has Thailand's unrest hobbled the central bank?)
— By CNBC.com's Tang See Kit.