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Hong Kong - Shanghai led a regional markets sell-off on Monday after another round of disappointing Chinese data at the weekend, with investors concentrating on a crucial US interest rate decision at the end of the week.
There was little reaction to news that Beijing intends to overhaul its vast state-owned firms in a bid to give a boost to the world's number two economy, while an earlier rally in some riskier assets petered out.
China on Sunday released another set of figures that underline weakness in its huge economy - the main driver of global growth - following soft reports last week.
The government said growth in industrial production increased below expectations in August while retail sales accelerated a little more than forecast.
A gauge of manufacturing this month showed the sector contracting in August, while inflation in consumer prices rose but those at the factory gate fell at their fastest pace in six years owing to slowing overseas demand and a slack property market.
While the data is soft, analysts said it could lead to further monetary easing measures by authorities following five interest rate cuts since November.
In equities trade Shanghai sank 3.10% by lunch while Hong Kong was 0.10% lower. Seoul was almost one percent down. Tokyo slipped 1.50% in the afternoon, hit by big losses in telecom firms after media reported comments from Japan's prime minister on the need to reduce mobile phone fees.
Sydney was marginally higher.
Beijing also unveiled a broad set of reform guidelines Sunday to partly privatise its vast state-owned companies aimed at making them more competitive overseas and increasing transparency.
The move comes after leaders in 2013 said they wanted the market to play a greater role in the economy, easing government influence on key sectors such as transport, energy production and arms manufacturing.
China overhaul plans
Among the reported changes are efforts to modernise SOEs (state-owned enterprises), improve management of state assets and diversify their ownership structures through "mixed ownership" - or the introduction of "multiple types of investors" - ultimately meaning more private shareholders or capital.
But Wu Kan, a Shanghai-based fund manager at JK Life Insurance, said: "The economic reports don't look good so investors prefer to be on the sidelines.”The SOE reform rules were widely expected by the market and aren't very detailed, therefore the reaction is limited. The market could fall to a lower level."
The main focus this week is on the Federal Reserve's policy meeting, with hopes it will hold off hiking borrowing costs until later in the year.
The central bank is expected to announce a lift-off before 2016 but its decision has been muddied by the latest bout of volatility to hit global markets caused by concerns about China's economy and after Beijing announced a shock devaluation of its yuan last month.
"Trading will remain volatile ahead of the (Fed policy) meeting," Bernard Aw, a strategist at IG Asia in Singapore, said.
"Sunday's data reinforced concerns about China's economy slowing down. Investors may expect more stimulus in the pipeline, which could provide some support to Chinese equities."
US dealers ended last week on a high. The Dow jumped 2.05%, the S&P 500 climbed 2.07% and the Nasdaq rallied 2.96%.
An initial rally in higher-yielding investments gave way to a move to safety.
The dollar edged down to ¥120.20 from ¥120.57on Friday in New York, while the euro was at ¥ 136.50 against ¥136.64. The yen is regarded as a safe bet in times of crisis and turmoil.
However, the dollar eased against some emerging market currencies. The South Korean won added 0.12%, while the Malaysian ringgit was up 0.11%. The Indonesian rupiah was flat.
