Asian stocks stumbled on Monday, as falling energy prices and disappointing manufacturing data out of China ignited "risk-off" sentiment.
The final reading for Caixin China purchasing managers' index (PMI) for July came in at 47.8, lower than the preliminary reading of 48.2 and marking a two-year low.
The figure also comes in below the official PMI figure released by the statistics bureau over the weekend. Growth at big manufacturing firms unexpectedly stalled last month with the official PMI standing 50.0 in July, compared with the previous month's 50.2 and below a Reuters' forecast of 50.2, as demand at home and abroad weakened.
A preliminary Caixin/Markit survey released earlier this month showed activity at smaller factories contracted by the most in 15 months. The index fell to 48.2 in July, coming in well below the 49.7 forecast from a Reuters poll and the 50-mark separating growth from contraction.
Wall Street finished mildly lower on Friday, the final day of trade for July, as investors digested missing in energy corporate earnings and soft U.S. data that could push an initial rate hike further out. According to government data, the second-quarter employment cost index recorded its slowest quarterly pace of growth on record.
Mainland markets down
China's Shanghai Composite index remained firmly in the red on Monday, closing down 1.1 percen, on the back of renewed concerns over the world's second-largest economy.
Meanwhile, market regulators suspended a trading account of U.S.-based hedge fund Citadel, the fund said Monday, as authorities in the mainland battle to prop up China's stumbling stock market.
Among the country's other indexes, the CSI300 index recouped losses to inch up 0.3 percent and the smaller Shenzhen Composite eased 2.7 percent. Hong Kong's Hang Seng index tracked its mainland peers to move down 1 percent.
Shares of HSBC outperformed the Hong Kong market after reporting a 2 percent year-on-year rise in adjusted pre-tax profit to $13 billion for the first half. The Hong Kong-listed stock reversed a negative open to advance 2 percent.
Nikkei sheds 0.2%
Japan's Nikkei 225 index drifted lower as softer oil prices and worries over the state of China's economy dampened risk appetite.
Stocks with China exposure were battered following the disappointing PMI; construction equipment makers Komatsu and Hitachi Construction Machinery eased 1.3 and 2.1 percent, respectively, while Nisshin Steel erased nearly 10 percent.
ASX slips 0.4%
Australia's index snapped a three-day winning streak, with investors dumping resources shares on the back of China-related worries.
Kospi eases 1.1%
South Korea's Kospi index widened losses to finish at a more than three-week closing low, as worries over the country's largest trading partner — China — dented sentiment.
While Malaysia's benchmark FTSE Bursa Malaysia KLCI managed to avoid the hit that other regional bourses suffered on Monday, the slumped to its lowest level since 1998 to trade at 3.8460 against the U.S. dollar.
Analysts attribute the decline in the currency to growing likelihood of a rise in U.S. interest rates, declining oil prices and recent political instability.
"The fact that the Federal Reserve is embarking on a rate hike and recent domestic political developments are reasons why the currency is under pressure," Khoon Goh, ANZ's senior FX strategist at ANZ, told CNBC.
"We also have Bank Negara Malaysia which tried to hold the currency earlier in July around the 3,880 level, using $5 billion of their FX reserves. This resulted in their reserves falling below the psychological $100 billion mark and now, that's starting to spook the market," he added.