By Chao Deng
Asia shares dropped Monday amid jitters about upcoming Chinese
manufacturing data and the continued declines in commodity
prices.
The Shanghai Composite opened 1.3% lower at 3614.99, while the
smaller Shenzhen Composite traded down 1.5% at 2079.13. The
small-cap ChiNext board slipped 2.5% to 2475.33.
The Nikkei Stock Average was down 0.8%, Australia's S&P ASX
200 lost 0.4% and South Korea's Kospi was down 1%.
In China, investors in the region await a final reading of the
Caixin manufacturing PMI for July later this morning.
The official manufacturing PMI, released on Saturday, slipped,
pointing to further sluggishness in the key manufacturing sector of
the world's second-largest economy. The reading fell to 50.0 in
July from 50.2 in June, according to the National Bureau of
Statistics.
The reading was disappointing given that "the official PMI
bottomed in January and had been grinding higher," Tim Condon, a
strategist at ING, wrote in a report Monday. Still he added, "We
believe the stock market panic in early July chilled economic
activity, which is what the manufacturing PMIs picked up. The
authorities quelled the panic, which we think will make the PMI
plunges transitory."
In July, the Shanghai Composite suffered its worst month in
nearly six years, revealing a receding confidence in Beijing's
ability to stem a selloff that began in mid-June. The Shanghai
Composite Index lost 14% in July, including 1.1% on Friday.
Losses in the commodities markets Monday came after big oil
companies pulled the Dow Jones Industrial Average lower Friday, on
disappointing earnings reports and signs of increased U.S. oil
drilling.
Brent crude, already at multi-month lows, was last down 0.7% in
Asia trade at $51.84 a barrel. Gold was last down $2.30 at
$1,092.70 an ounce.
"The biggest question for the month is whether we give back the
gains from July," IG market strategist Evan Lucas said of the
Australia's market. This week sees Australia's earnings season
begin in earnest, with companies including Suncorp Group Ltd.,
Virgin Australian Holdings Ltd., and Rio Tinto Ltd. all set to turn
in numbers. The ASX 200 climbed 4.4% last month, the first monthly
rise since February.
Shares in Japan fell even as the yen weakened. The currency last
traded at 124.08 from 123.92 late Friday in Asia.
A softer yen, in addition to the benefits of growing North
American demand and higher spending by foreign tourists, however,
has helped Japanese corporates, which have so far reported robust
profit growth in the April-June quarter. Of the 596 nonfinancial
companies closing their books in March that reported earnings by
the end of July, 70% saw pretax profit increases on the year, The
yen average slightly more than 121 to the dollar in April-June,
nearly 20 yen weaker than a year earlier.
Hiroyuki Fukunaga, CEO at Investrust, said Japan stocks are
likely to continue trading in lackluster fashion before anxiously
awaited U.S. jobs data is delivered on Friday.
"The U.S. Federal Reserve bank has been very reticent to declare
September as a definite 'go' time for raising interest rates; it
remains heavily data-reliant," he said . "Thus Friday's jobs data
is seen as critical to formulating the decision on timing.
Investors are expected to remain largely in a holding pattern this
week as a result."
Futures for the Hang Seng Index were down 0.4% at 24533.14.
The latest measures by Chinese regulators to stem selling
include an investigation into suspicious activity of trading on the
mainland. China's securities regulator said Friday it has launched
a probe into automated trading and has restricted 24 stock accounts
suspected of influencing stock prices. The government didn't name
any of the parties behind the restricted stock accounts, but
U.S.-based hedge fund Citadel LLC said trading in one of the
accounts it manages in China has been suspended.
Write to Chao Deng at Chao.Deng@wsj.com