Asian shares outside South Korea were on the back foot on Thursday, as economic data out of the region's top two economies heightened concerns about growth.
Japan's core machinery orders fell 3.6 percent in July from a month earlier, missing expectations for a rise of 3.7 percent, underscoring the need for Bank of Japan (BOJ) to offer fresh stimulus.
Over in China, the consumer price index (CPI) rose 2 percent in August from a year earlier, beating expectations for a 1.8 percent gain and up from 1.6 percent in July. However, the producer price index (PPI) declined 5.9 percent, compared with an expected 5.5 percent drop and after a 5.4 percent decline in the previous month. This marks the 42nd consecutive month of declines.
"PPI is related to what's happening in the real economy because it affects the revenue and profit of the corporate sector, which in turn will affect fixed investment and overall growth," Grace Ng, senior China economist at JP Morgan, told CNBC Asia's "Squawk Box."
"So from that perspective, it is still very much of a concern with PPI stuck in negative territory," Ng said.
An unimpressive lead from Wall Street also weighed on sentiment. Major U.S. averages ended down more than 1 percent overnight, on the back of selling pressure in Apple and energy-related counters. The blue-chip Dow and the S&P 500 lost 1.45 and 1.35 percent, respectively, while the Nasdaq Composite closed down 1.15 percent.
Nikkei skids 2.5%
Japan's benchmark Nikkei 225 index failed to extend Wednesday's spectacular run, after a surprise miss in core machinery orders added to concerns about Asia's second-biggest economy.
Following the data release, the government cut its assessment for the leading indicator of private sector capital investment, saying that the pick-up in machinery orders "is seen stalling," Reuters reported.
In the previous session, the Tokyo bourse soared 7.7 percent, posting the bourse's largest one-day gain since October 2008, partly due to Prime Minister Shinzo Abe's announcement early Wednesday that he would try to lower the corporate tax rate by at least 3.3 percentage points in the next financial year.
Short covering also likely contributed to the surge, according to IG analysts. "Short positions on the Nikkei dropped to 37.4 percent on Wednesday after sitting at 41.2 percent on Tuesday, further demonstrating that yesterday's rally was driven by short-covering," Melbourne-based Angus Nicholson wrote in a note.
Decliners were mostly in the energy, consumer discretionary, telecoms and consumer staples sectors. Profit-takers also likely eyed financial stocks, with Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group down more than 2 percent each.
Mainland markets lower
China's share markets were submerged in negative turf for most of the trading day, tracking the region-wide sluggishness.
The key Shanghai Composite index closed down 1.5 percent, breaking a two-day winning streak. The blue-chip CSI300 and the Shenzhen Composite index also finished 1.2 and 1.6 percent lower, respectively.
The declines came amid remarks from Chinese Premier Li Keqiang who said Thursday that China is not at risk of a hard landing. Speaking at the World Economic Forum (WEF) in Dalian, Li said China's economy faces challenges and downward pressures but there is no risk of a hard landing as the government is fully capable of supporting growth.
Shares of automakers were mixed after data released by an industry association showed auto sales in the mainland fell 3.0 percent in August from a year earlier to 1.7 million vehicles. That compares with a 7.1 percent drop in July and a 2.3 percent decline in June.
Dongfeng Auto closed down 4.2 percent, while Guangzhou Auto and Shenzhen-listed FAW Car notched up 0.2 and 1.3 percent, respectively.
ASX loses 2.4%
Australia's index surrendered all of Wednesday's advances, with banking and oil-related stocks among the hardest-hit. According to Reuters, Thursday's decline is the bourse's biggest drop in over three weeks.
Santos slumped 5.1 percent following weakness in crude oil prices in Asian trade. Woodside Petroleum, which proposed an $8 billion all-share takeover plan for rival Oil Search on Monday, eased 2.6 percent.
Market bellwether BHP Billiton extended losses, down 3 percent, after going ex-dividend on Wednesday. Major lenders National Australia Bank, Australia and New Zealand Banking and Westpac also tumbled more than 3 percent each, contributing significant pressure on the bourse.
On the domestic data front, employment rose by 17,400 in August, better than a Reuters' forecast for a rise of 5,000, figures from the Australian Bureau of Statistics showed on Thursday. The unemployment rate edged down to 6.2 percent as expected, helping to take some pressure off the Australian dollar which edged up towards 70 U.S. cents following the data release.
Meanwhile, shares in New Zealand finished flat after the Reserve Bank of New Zealand (RBNZ) cut its benchmark interest rate for the third consecutive meeting early Thursday while signaling the possibility of further easing. The 25-basis-point cut in the official cash rate to 2.75 percent was widely expected by analysts amid a softening economic outlook.
The tumbled 1.8 percent to $0.6285 on Thursday, near the six-and-a-half-year low of $0.6200 it hit last week.
Kospi rebounds 1.4%
South Korea's Kospi index changed course to end at its highest level since August 18, with shipbuilders leading the charge.
Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering closed up above 9 and 7 percent respectively.
Blue chips turned mostly positive; Kepco and Posco advanced 3.4 and 1 percent respectively, but the bourse's top weighted stock Samsung Electronics held on to losses of 1.1 percent. Energy producers SK Innovation and S-Oil also pared losses to notch up 0.8 and 1 percent respectively.
However, Mirae Asset Securities Co. plunged nearly 18 percent after announcing late Wednesday that it would carry out a 1.2 trillion rights issue.
Taiex sheds 0.2%
Taiwan's weighted index edged down from Wednesday's one-month high, as a decline in Apple overnight pressured the shares of Taiwan-listed suppliers.
Quanta Computer bucked the downtrend to close up 2.8 percent after announcing that its August sales stood at T$90.9 billion (approximately $2.79 billion).