Asian equities were mixed on Monday as investors digested a better-than-expected report of Chinese factory activity, but volumes were thin with Japan shut for a public holiday.
Amid gainers, the Shanghai Composite rose to a one-week high while South Korea's Kospi ended above the flatline. But Australia's benchmark index remained in negative territory and emerging markets were sold off.
China PMI boost
HSBC's flash manufacturing Purchasing Managers' Index (PMI) of small and medium-sized firms in China hit a six-month high of 51.2 in September thanks to strong domestic and foreign demand.
"Strong new orders suggests that this recovery has some legs so it probably will continue at least into year-end if not beyond. I would stay tuned for more upside surprises on growth for China," said Frederic Neumann, managing director and co-head of Asian economics research at HSBC.
Meanwhile, the was little changed around $1.3540 per dollar in Asian trade after German Chancellor Angela Merkel's resounding victory in Sunday's elections.
Shanghai up 1.3%
China's benchmark index resumed trade to hit a one-week high after being shut on Thursday and Friday for holidays.
Milk powder maker Inner Mongolia Yili Industrial Group rallied over 3 percent after a report in the China Business Journal said that the firm is set to receive nearly $5 billion to support sector consolidation.
Meanwhile, stocks related to the upcoming Shanghai free trade zone continued to benefit. Shanghai Material Trading and distributor Shanghai Waigaoqiao rose by the daily trading limit of 10 percent each.
Seoul 0.2% higher
South Korea's benchmark index closed below session highs as it resumed trade after being shut since last Wednesday for public holidays.
The Kospi earlier fell below the 2,000 mark to its lowest level since September 13 due to large losses in blue-chip stocks before erasing those losses to enter positive territory.
India down 1.8%
India's benchmark index extended sharp losses after the Reserve Bank of India raised interest rates on Friday. The index traded below 20,000 points while the weakened by nearly half a percent against the greenback.
Sydney falls 0.5%
Australia's benchmark index trimmed steep opening losses after the release of China's upbeat PMI figures but still closed lower, while the Australian dollar rose 0.4 percent against the greenback.
Gold miners were the index's worst-performers after the yellow metal steadied on Monday following it's 3 percent drop on Friday. Perseus Mining plunged over 15 percent, Newcrest Mining lost 8.3 percent and Kingsgate Consolidated shed over 5 percent.
One of the world's biggest winemakers,Treasury Wine Estates slumped over 6 percent after its CEO David Dearie announced his resignation early Monday.
"Fund managers are finding it harder and harder to find value with the ASX 200 currently trading on 15.39x consensus forward earnings, which is still below the 16x multiple it was trading on in May, but 14.4 percent above the five-year average," said Chris Weston, market strategist at IG in a note.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC