Asia lifted by China optimism; Syria risks ease

Asian equity markets kicked off September higher after two separate readings of Chinese factory activity confirmed hopes of a recovery in the world's second-largest economy.

Japanese stocks jumped 1.4 percent, Australia's S&P ASX 200 hit a three-month high while the Shanghai Composite and South Korea's Kospi both closed flat.

HSBC's private survey of Chinese manufacturing activity crossed the key 50-level for the first time in four months in August, in line with last week's flash reading. The data follows the government's more bullish official purchasing manager's index (PMI), which hit a sixteen month high in August.

"It's interesting to see once again, despite all the emerging market volatility, the fear of Fed tapering and the geopolitical risk, China once again became the stabilizing factor," said Jian Chang, chief China economist at Barclays. But despite the good data, Chang still expects annual growth to slow down towards year-end.

Meanwhile, U.S. President Barack Obama's decision to delay an imminent strike against Syria provided temporary relief to fears of a conflict in the Middle East. Obama said he would only act on Syria after getting approval from Congress, which comes back into session on September 9.

Nikkei up 1.4%

Property and construction stocks led Japan's benchmark index higher on investor optimism that Tokyo will win the bid to host the 2020 Summer Olympics, which would boost redevelopment demand. A decision is due on September 7.

Construction firm Kajima and real estate developer Tokyo Tatemono rallied 5.4 percent each while builder Taisei rose nearly 6 percent.

Fukushima nuclear plant operator Tokyo Electric Power Company erased an earlier 6 percent loss to close up nearly 2 percent higher after Prime Minister Shinzo Abe pledged renewed help to resolve the plant's contaminated water problems.

Investors also cheered a weaker yen. The currency fell half a percent against the greenback to retreat further from last week's high of 96.81.

Shanghai flat

China's benchmark stock index closed just below the 2,100 mark after trading in negative territory for most of the session. The index notched up gains of over 3 percent for the month of August as Asia's best-performing index.

Shares in brokerage Everbright Securities declined over 8 percent as trading resumed following the resignation of two senior executives. Other financials were higher with mid-sized lender Minsheng Banking up by nearly 1 percent.

In earnings news, liquor maker Kweichow Moutai fell 10 percent after reporting its smallest first-half net profit since its listing while China Railway Construction rose 3 percent after reporting a 45 percent rise in first-half net profit.

Sydney rises 1%

Australia's benchmark index crossed the 5,170 mark to hit its highest levels since May 22 as investors cheered China's economic recovery.

Construction stocks rallied after after approvals to build new homes rose 10.8 percent in July. Builders Boral increased 4 percent while James Hardie climbed 1.6 percent.

Surf-wear retailer Billabong surged 15 percent after New York-based hedge fund Coastal Capital International called for a a shareholder meeting to in order to remove its board of directors.

Financials also lent support with National Australia Bank, Westpac and Australia New Zealand Bank higher by over 1 percent each.

Kospi steady

South Korea's benchmark index erased earlier gains to fall below 1,930 points, retreating from a one-month high hit earlier in the session.

A weak manufacturing report added to the weak sentiment. The HSBC/Markit purchasing managers index (PMI) rose to 47.5 in August, indicating a third straight month of contraction.

Industrial stocks were hit with automakers Hyundai Motor down nearly 2 percent while Kia Motors fell 1.5 percent. Meanwhile, index heavyweight Samsung Electronics lost over 1 percent.

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