Asian stocks end mixed after disappointing China PMI

Asian stocks closed mixed on Wednesday after HSBC's key survey of Chinese manufacturing activity fell to an eleven-month low in July, confirming signs of a further slowdown in the world's second-largest economy.

The Shanghai Composite lost half a percent, Japan's Nikkei index closed down 0.3 percent. Amid gainers, South Korea's Kospi hit a six-week high and Australia's S&P ASX 200 index closed at a two-month peak.

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China growth fears in focus

Market focus was on HSBC's flash estimate of its China July purchasing managing index (PMI). The figure came in at 47.7, slipping further below the 50-mark that divides expanding activity in the sector from a contraction. Analysts attributed part of the weakness to last month's rise in money market rates, which reduced the amount of credit available to manufacturers.

Some experts said the weak number won't necessarily urge the government to take monetary stimulus measures.

"We think there's very little chance China will do some kind of mega-stimulus. The leadership understands that it was effectively the direct result of the 4 trillion renminbi package they did back in 2009 that created the property market bubble & all the associated socio-political tensions that resulted in 2010. And they are absolutely insistent on not repeating those mistakes," said Michael Kurtz, global head of equity strategy, Nomura.

Shanghai tanks 1%

Steep losses in Chinese industrial sectors such as autos, steel producers and cement makers led the benchmark stock index to retreat from the previous day's 2 percent rally.

Guangzhou Auto, Huaxin Cement and Yanzhou Coal all lost 4 percent each.

Financials were also under pressure with mid-sized lenders Hua Xia Bank lower by nearly 5 percent while while Inudstrial Bank fell 3.7 percent.

Immediately following the factory activity data, Beijing announced that it will push for mergers and restructuring of companies such as steel, cement, aluminium and and shipbuilders in a bid to tackle overcapacity. The move underlined Tuesday's remarks by Chinese president Xi Jinping, where he emphasized the government's determination to restructure the economy.

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Sydney up 0.3%

Australia's benchmark index crossed the 5,030 mark to hit its highest levels since May 24 thanks to a rally in resources. Atlas Iron added 9.6 percent after reporting a 25 percent increase in fiscal year 2013 iron ore shipments while Panoramic Resources increased 8 percent.

The Australian dollar fell back to the $0.92 handle on the back of China's weak manufacturing figures just minutes after benign domestic inflation data saw the currency spike to a one-month high of $0.9317.

Consumer prices rose 2.4 percent in the second-quarter from a year earlier, just below economist expectations for a 2.5 percent gain. The lower-than-expected figure increased the chances of an interest-rate cut at the Reserve Bank of Australia's (RBA) August meeting. Earlier this month, the RBA said that a diminishing inflation outlook would be a key factor in it's decision to ease policy.

"Since the rate cut in May this year, more and more dovish analysts have been crying foul that the RBA has started to jawbone again because inflation is stagnating and the non-mining economy is drowning," wrote Evan Lucas, market strategist at IG in a note.

Nikkei down 0.5%

Japanese stocks pulled back even as the yen weakened 0.3 percent to the 99 handle against the U.S. dollar. Tech exporters Sony and Panasonic fell 0.2 and 0.8 percent, respectively.

But Apple-related stocks received a boost following better-than-expected earnings from the Cupertino giant. Component makers Meiko Electronics and Foster Electric added 2 percent each while Murata Manufacturing added nearly 4 percent.

Also weighing on sentiment was weaker-than-expected June trade data. Exports rose for a fourth straight month in June, up 7.4 percent from a year earlier but missed market expectations for a 10.3 percent gain.

"The scene behind [the export data] could be partially explained by the fact that the share of USD settlement is so much more for import than export, meaning that yen's depreciation is a factor to contribute more to increasing import value than export," wrote analysts at Credit Agricole in a note.

(Read more: Here's when to get out of the Nikkei rally)

Kospi 0.4% higher

South Korea's benchmark index crossed the 1,905 level to hit a six-week peak as domestic exporters benefited from the yen's strength. Automaker Hyundai Motor added 0.7 percent.

Apple component suppliers also rose, with memory chip maker LG Display and display maker Samsung SDI higher by 2 percent each.

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The world's number two TV maker LG Electronics rose 2.3 percent after reporting a 9 percent fall in second-quarter profit due to weak sales. Shares rallied as the figure still exceeded market forecasts.

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