×

China stocks outperform cautious Asia, up nearly 5%

China's Shanghai Composite index bucked the cautious sentiment across Asia on Monday, surging nearly 5 percent to end at a two-week high.

Meanwhile, the rest of the region finished off the day's lows after getting a boost from the rally in the mainland, but the relentless decline in oil prices and less-than-stellar data from China over the weekend limited advances.

According to data released by the National Statistics Bureau on Sunday, China's producer prices fell 5.4 percent in July from a year earlier, compared with an expected 5.0 percent drop. It was the worst reading since October 2009 and the 40th straight month of price decline. Consumer inflation remained muted at 1.6 percent despite surging pork prices, in line with forecasts and slightly higher than June's 1.4 percent.

Meanwhile, exports tumbled 8.3 percent in July, marking their biggest fall in four months, as weaker global demand for Chinese goods and a strong yuan policy hurt manufacturers.

"We think this is all pointing to the necessity of further easing in China. Our official view is another [interest] rate cut and 100 basis points cut in [the] reserve requirement ratio (RRR) in the next few months," Malcolm Wood, chief investment strategist for Australia at Bank of America Merrill Lynch, told CNBC's "The Rundown."

Read MoreStocks put to the test in week ahead

On Friday, Wall Street ended lower on the back of declines in oil prices and upbeat job growth data that was seen as putting the Federal Reserve on course for a potential rate hike in September.

The Dow Jones Industrial Average shed 0.27 percent to chalk up its seven straight session of declines, the worst losing streak since the summer of 2011. The S&P 500 and the Nasdaq Composite eased 0.29 and 0.26 percent, respectively.

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

Mainland stocks on a tear

China's Shanghai Composite index brushed off the weekend's poor economic data to close up 4.9 percent, hitting a two-week high of 3,928 points and just a whisker below the key psychological mark of 4,000.

The blue-chip CSI300 index climbed 4.5 percent, while the smaller Shenzhen Composite gained 4.5 percent.

Analysts attribute Monday's surge to a variety of factors such as investors betting on possible further policy stimulus, as well as restructuring among major shipping firms and other key sectors, Reuters reported.

Among gainers, railway, cement and property names attracted the most buy orders. China Railway Group and China Railway Construction surged by the daily maximum allowable of 10 percent each, while Baoshan Iron and Steel led gains within the building material sector with a rise of 10 percent.

In the real estate sector, heavyweights Poly Real Estate and China Vanke closed up 5 and 3.2 percent, respectively.

Read MoreData dump shapes up busy week ahead for Asia

Hang Seng slips 0.3%

Hong Kong's Hang Seng index bucked the uptrend in its mainland peers to slip back into negative territory in the final hour of trading.

"In Hong Kong, about 80 percent of the trading volume is conducted by institutional investors... but in the A-share market, retail investors account for 90 percent of the activity so it's entirely different market psychology. China follows the trend in the government's policy and Hong Kong follows [market] fundamentals and that's why you are seeing the big gap here," Chen Jiahe, analyst at Cinda Securities, told CNBC.

Financials were the main laggards, with Standard Chartered and HSBC shaving off 2 percent each. Meanwhile, H-shares helped to offset the losses by advancing against the backdrop of a soaring Shanghai Composite.

Italian luxury brand Prada edged up 0.1 percent, brushing off a lackluster earnings report which missed market expectations to post a modest 4 percent rise in sales for the six months ended July 31.

ASX gains 0.6%

Australia's S&P ASX 200 index recouped some losses after tumbling 2.4 percent last Friday, chalking up the bourse's steepest one-day fall in three years.

A reversal in banking shares underpinned the rise; National Australia Bank changed course to advance 1.5 percent after reporting a 9 percent rise in third-quarter profit.

Westpac and Australia and New Zealand Banking rallied more than 1 percent each, possibly on bargain hunting or short covering following last week's steep losses. Commonwealth Bank of Australia closed up 1 percent after the lender issued a statement saying it hasn't made a decision on raising capital.

Consumer discretionary stocks also propped up the bourse, with JB Hi-Fi surging 10.6 percent after beating expectations for its full-year earnings. The stock's rally bolstered sentiment for fellow retailers such as Myer and Harvey Norman, which closed up 4 and 3.8 percent, respectively.

Underperforming the bourse, Bendigo and Adelaide Bank tanked 2.6 percent despite posting a 14 percent profit rise. Ansell slumped 15.8 percent after the condom and rubber glove maker flagged that volatile exchange rates could wipe out $55 million off its revenue in the year ahead.

Nikkei gains 0.4%

Japan's Nikkei 225 turned positive in the afternoon session, as sentiment improved on the back of robust gains in China's equity markets.

Index heavyweight Softbank closed up 2.8 percent on the back of Friday's announcement of a near $1 billion share buyback. Telecoms company KDDI charged up 4.4 percent, while Yokogawa Electric rallied 6.3 percent following the delivery of strong quarterly earnings.

Japan Display soared 15.2 percent after the smartphone display maker posted operating profit of 2.2 billion yen in the April-June period, reversing a loss of 12.6 billion yen in the same period last year.

However, stocks with considerable exposure to China still traded on the back foot. Construction equipment makers Komatsu and Hitachi Construction Machinery fell more than 1 percent each on Monday.

Read MoreWill a militaristic Abe torpedo his own leadership?

Kospi sheds 0.4%

South Korea's Kospi index finished at a more than four-week low, with retailers and oil producers leading the southbound move.

Lotte Shopping slumped 8.5 percent to its lowest since April 2009 after its April-June earnings fell 35.3 percent from a year earlier. Tracking the fall in Lotte Shopping, Shinsegae and E-Mart plunged 4 and 5 percent, respectively.

S-Oil and SK Innovation receded more than 3 percent each, in tandem with the fall in crude oil futures, which touched fresh multi-month lows in early Asian trade.

Shares of water purifier maker Coway closed down 8.7 percent following local media reports that private equity fund MBK Partners plans to sell a controlling stake worth nearly $2 billion.