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Nikkei leads Asia stocks higher after China PMI lifts stimulus hopes

Asian stocks rose on Monday after weak Chinese manufacturing activity raised hopes that Bejing will unveil fresh monetary stimulus to combat slowing growth.

HSBC's flash Purchasing Managers' Index (PMI) came in at 48.1 in March after hitting a seven-month low of 48.5 in February. Markets are extra-sensitive to the release as worries grow about the health of the world's second biggest economy.

(Read more: China, Japan data in focus for Asia this week)

"Just as tight credit and higher interest rates in the second half of 2013 translated into slower growth in the first quarter of 2014, looser credit and government support for investment in early 2014 will support growth later this year," said Bill Adams, senior international economist for PNC Financial Services Group.

Meanwhile, investors brushed off a negative U.S. lead. Wall Street stocks fell on Friday due to caution over tensions in Ukraine, with the S&P 500 erasing gains after rising to an intraday record.

Symbol
Name
Price
 
Change
%Change
NIKKEI
---
HSI
---
ASX 200
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SHANGHAI
---
KOSPI
---
CNBC 100
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Nikkei 1.8% higher

Japanese shares rallied on bargain hunting and as the benchmark Nikkei index played catch-up with the region following Friday's public holiday. A slightly weaker yen also lifted sentiment as the currency traded around 102.4 per dollar.

Blue-chip tech stocks led the gains with Nintendo and Sharp more than 5 percent higher. Panasonic rose 6 percent while Sony climbed 2.3 percent.

Yamato Holdings rose 3.5 percent after the Nikkei reported that that the firm will tie up with China Post to launch a delivery service in the mainland.

(Watch now: Japanese corporates await structural reforms)

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Shanghai rises 1%

Mainland shares extended gains after shooting up nearly 3 percent on Friday while the yuan traded near Friday's 13-month low against the greenback. Sentiment rose after the China Securities Regulatory Commission announced on Friday that it will expand its bank financing options in a bid to boost market sentiment.

(Read more: China will avoid past mistakes on stimulus: Vice Fin Min)

Oil major Sinopec fell nearly 1 percent after saying it will cut capital spending by 4.2 percent this year after reporting a lower than expected full year profit of 66 billion yuan.

ASX ends 0.2% higher

Australia's benchmark S&P ASX 200 managed to eke out slim gains in the final hour of trade, erasing earlier losses. Traders are awaiting speeches from Reserve Bank of Australia officials this week for further trading cues.

Meanwhile, the Australian dollar fell below 91 U.S. cents following HSBC's weak China PMI data.

(Read more: Aussie dollar resilience: Here today, gone tomorrow?)

In earnings news, Macquarie jumped 2.9 percent after saying it expects a 40 to 45 percent annual rise in fiscal 2014 earnings, while online retailer Kathmandu surged as much as 10 percent after posting a 10 percent rise first-half net profit.

Kospi up 0.5%

South Korean shares ended at their highest levels in nearly two weeks, extending gains into a second straight session. Shipbuilders advanced with Daewoo Shipbuilding 4 percent higher and Hyundai Heavy up 1.5 percent.

(Read more: What I worry the most about China: Caterpillar CEO)

Emerging markets mostly higher

India's benchmark index rallied over 1 percent to a fresh record high for the second time this month on the back of strong foreign buying, before closing at 22055.48 points. Elsewhere, Philippine shares ended 0.8 percent higher.

By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC