ASIA MARKETS: Asia Stocks Come Off Lows After China Data

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Asian stocks came off their lows Thursday as a surprise improvement in Chinese manufacturing helped cheer investors after minutes of the Federal Reserve's last meeting signaled the central bank was on course to pare bond purchases this year.

The Shanghai Composite reversed early losses to rise 0.1% in choppy trading after preliminary data released by HSBC showed China's manufacturing Purchasing Managers' Index rose to a four-month high of 50.1 in August, signaling an expansion in activity. HSBC's final reading for July had put China's manufacturing PMI at 47.7, an 11-month low.

"China's manufacturing growth has started to stabilize on the back of modest improvements of new business and output. This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies' restocking activities," said HSBC's chief China economist Hongbin Qu.

Chinese banks paced the advance in Shanghai, with China Merchants Bank Co. (CIHKY) rising 1.1%, and Industrial Bank Co. adding 1.8%.

Most other markets cut their sharp early losses after the China data, with Japan's Nikkei Stock Average off 0.2%, and Hong Kong's Hang Seng Index 0.3% lower, while South Korea's Kospi and Australia's S&P/ASX 200 were down 0.5% each.

All four of those markets had dropped more than 1% earlier in the day, tracking a lower finish on Wall Street. Minutes of the Fed's July meeting showed Wednesday that central-bank officials had agreed the U.S. economy will pick up later this year, allowing the Fed to taper its $85 billion-a-month in bond purchases before the end of the year.

The officials didn't say exactly when they would reduce the size of the Fed's stimulus -- a key tailwind for global markets -- and market participants differed in their opinions.

Economists at Barclays said the minutes didn't change their view that the central bank would taper bond purchases at its September meeting.

IHS Global Insight financial economics director Paul Edelstein expects the Fed to decide in favor of tapering the purchases at its December meeting and gradually wind down the asset-buying further through the first half of 2014.

Some others saw the Fed minutes as signaling a wait-and-see approach.

"The Fed certainly seems to have mastered the art of keeping the market guessing. ... The only way forward is to continue closely watching U.S. economic data for clues on how soon we can expect tapering to start," said IG Markets strategist Stan Shamu.

Exporters and resources were among the sectors on the retreat Thursdayin Asia, amid concerns the Fed's reduced stimulus would lower demand for exports from the region and could affect investment inflows to emerging markets.

Among mining and metals shares, BHP Billiton Ltd. (BHP) gave up 0.9%, and gold extractor Newcrest Mining Ltd. (NCMGF) fell 2.2% in Sydney, with both off the day's lows.

Likewise, Pacific Metals Co. (PFMTF) lost 2.8% in Tokyo, steel maker Posco (PKX) dropped 1.1% in Seoul, and energy major Cnooc Ltd. (CEO) gave up 0.8% in Hong Kong.

Several technology and automobile exporters also lost ground, with Isuzu Motors Ltd. (ISUZY) falling 2.7%, and Sony Corp. (SNE) shedding 1.8% in Tokyo, while LG Display Co. (LPL) gave up 1.9% in Seoul.

However, some insurance stocks provided support to the Japanese market after recent losses. T&D Holdings Inc. (8795.TO) rose 2.5%, and Dai-Ichi Life Insurance Co. (DCNSF) gained 1.7%.

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