HONG KONG - Asian markets slumped on Thursday, as China manufacturing data showed the world's second-largest economy losing strength and Japan logged its worst-ever January trade deficit.
HSBC's preliminary reading for its purchasing managers' index (PMI), which tracks manufacturing activity in China's factories and workshops, contracted in February to its lowest level in seven months.
The index, a closely-watched gauge of the health of the Asian economic powerhouse, also tumbled in January, losing ground for the first time in six months.
The outcome hit currency markets, with traders moving into the yen which sank to 101.87 (S$1.265) in Tokyo from 102.31 yen on Wednesday in New York. The euro weakened to 140.18 yen from 140.51 yen in US trade, while it rose to US$1.3780 (S$1.74) from US$1.3734.
Tokyo shares slumped 2.15 percent, or 317.35 points, to finish at 14,449.18 after the January trade deficit swelled on the back of surging imports. Seoul's main index lost 0.64 percent, 12.36 points, to 1,930.57.
Hong Kong lost 1.19 percent, or 270.44 points, to 22,394.08 while Sydney barely edged up, gaining 4.1 points to 5,412.3.
Chinese shares also lost ground, with the benchmark Shanghai Composite Index ending down 0.18 percent, or 3.77 points, to 2,138.78. The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 1.55 percent, or 17.93 points, to 1,139.27.
Sentiment was also hurt after the central bank drained 60 billion yuan (S$12.49 billion) from the interbank market through its regular open market operations on Thursday, in an effort to slow credit growth.
"The weak PMI figure and the central bank's open market operation today curbed gains in the Shanghai index," Zheshang Securities analyst Zhang Yanbing told AFP.
Also weighing on regional bourses was a negative session on Wall Street Wednesday after news that some US Federal Reserve policymakers had sought an early hike in the Fed's benchmark interest rate.
And new data showed US home construction and building permits plunged more than expected in January due to severe winter weather in much of the country.
The Dow Jones Industrial Average fell 0.56 percent to 16,040.56. The broad-based S&P 500 slumped 12.01 (0.65 percent) to 1,828.75, while the Nasdaq Composite Index lost 34.83 (0.82 percent) at 4,237.95.
Singapore closed flat, edging down 2.15 points at 3,086.64.
Telecommunications company StarHub eased 0.24 percent to $4.11 while DBS bank rose 0.36 percent to $16.62.
Flight to safe haven yen
The gloomy China and Japan data came as the IMF called for the Group of 20, which meets in Sydney at the weekend, to boost growth as it warned of risks to the global economy - from deflation in Europe to high volatility in emerging economies.
"The market is generally in a risk-off mood," Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ, told Dow Jones Newswires as investors drove up the yen, seen as a safe haven currency in times of turmoil.
Oil was down in Asian trade. New York's main contract, US benchmark West Texas Intermediate (WTI) for March dropped 24 cents to US$103.07 in afternoon trade, while Brent North Sea crude eased 55 cents to US$109.92 for its April delivery.
Gold fetched $1,314.30 an ounce at 1117 GMT from US$1,318.37 late Wednesday.