ASIA MARKETS: Shanghai, Hong Kong Stocks Sag; Tokyo Rises

By Sarah Turner and V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Stocks in Shanghai and Hong Kong pulled back Friday as lackluster data on Chinese manufacturing prompted a retreat after a solid rally in the previous session, while Japanese shares got a lift as real-estate firms advanced on an improved outlook.

Hong Kong's Hang Seng Index lost 0.6% and the Shanghai Composite Index fell 0.3% after jumping at least 2% in the previous session, while Australia's S&P/ASX 200 index lost 0.4%.

The drop came after two separate sets of manufacturing data showed activity at Chinese factories leveled off in February as compared to the previous month. Read: China manufacturing grows marginally, surveys show.

Several economists, however, said the data may have been distorted due to the timing of this year's Lunar New Year holidays, and remained optimistic about growth.

"China's recovery continues on improving domestic-demand conditions and the labor market. The pace of ongoing recovery is mild, implying no need for the People's Bank of China to tighten policy anytime soon," said Hongbin Qu, the chief China economist at HSBC.

The resource and financial sectors were notably weaker, with Jiangxi Copper Co. (JIXAY) dropping 2.5%, Aluminum Corp. of China Ltd. (ACH) skidding 4.8% and Agricultural Bank of China Ltd. (ACGBY) easing 0.8% in Hong Kong; in Shanghai, the stocks lost 1.4%, 0.8% and 1.7%, respectively.

Sun Hung Kai Properties Ltd. (SUHJY) fell 1.9% in Hong Kong after cutting its fiscal-year property sales target and reporting a 1.9% decline in first-half underlying net profit.

Resource stocks in Australia also weakened after the China data, with Fortescue Metals Group Ltd. (FSUMY) sliding 4% and Rio Tinto Ltd. (RIO) dropping 1.5%.

Newcrest Mining Ltd. (NCMGF) slid 1.8% and Perseus Mining Ltd. (PMNXF) tumbled 5.6% after gold futures fell for a second straight session in New York on Thursday.

Japan stocks rise

Meanwhile, Japan's Nikkei Stock Average finished up 0.4%, extending Thursday's 2.7% surge, with real-estate stocks jumping to offset a drop in some exporters as the yen strengthened. The South Korean market was closed for a holiday.

The performance helped Japanese stocks end the week with a 1.9% advance -- behind the Shanghai Composite's 2% rise, but ahead of the S&P/ASX 200's 1.4% climb and the Hang Seng Index's 0.4% increase.

Shares of Japan Real Estate Investment Corp. (8952.TO) rose 3.9%, Mitsui Fudosan Co. (MTSFY) gained 3.2% and Mitsubishi Estate Co. (MITEY) jumped 6.1%.

Those gains helped the broad market gain even as Fast Retailing Co. (FRCOY) eased 0.2%, Komatsu Ltd. (KMTUY) dropped 0.6% and Isuzu Motors Ltd. (ISUZY) shed 1.1%.

"We continue to favor a weaker Japanese yen (USDJPY) over the medium term. A collapse in Japan's current-account surplus is the main driver," said foreign exchange strategists at Commonwealth Bank of Australia.

Sony Corp. (SNE) gained 3.9% after the Nikkei business daily reported the company had sold a building in Tokyo for 111.1 billion yen ($1.2 billion).

Sharp Corp. (SHCAF) rose 2.4% after a Kyodo News report that the electronics firm would soon accept executives from two major banks to secure their financial support. Read: Sharp to accept executives from banks.

Tokyo Electric Power Co. (9501.TO) added 2.9% after a Nikkei News report that the firm was ordering more than Yen10 billion worth of supplies and equipment to use for decommissioning reactors at its Fukishima plant destroyed in the 2011 nuclear disaster.

Kobe Steel Ltd. (KBSTY), which was reportedly supplying the material, added 0.8%.

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