Mercedes-Benz factory, Beijing
China's factory output grew less than expected in AugustReuters

Most Asian markets were in negative territory on 14 September as new economic data released by China over the weekend cast further doubt on the strength of the world's second largest economy. The mainland's benchmark Shanghai Composite index dived 3.2% to 3,097.71 points at midday after official figures showed China's industrial output, fixed-asset investment and real estate investment all grew less than expected.

Factory production was up 6.1% from a year earlier in August - stronger than July's 6% growth - but missing analysts' expectations for a 6.4% rise, while fixed-asset investment advanced 10.9% in the January to August period, again missing forecasts for an 11.1% increase. "The pace of slowdown in fixed-asset investment is relatively fast – dragged by the property sector, while the factory sector remains sluggish," Zhou Hao, senior economist at Commerzbank AG in Singapore, told Reuters.

"Overall, the economy is very weak and the central bank may have to continue cutting interest rates and banks' reserve requirement." The region's biggest stock market, the Nikkei 225, reacted negatively to the news, falling 1.5% to 17,989.51.

Fed uncertainty

Investors were also cautious ahead of a crucial US Federal Reserve policy-setting meeting on 16-17 September, with economists split over whether the central bank will finally tighten monetary policy after seven years of near-zero interest rates. "This will lead to very light trading and tentative positioning for the next three days," said Evan Lucas, IG market analyst. "Commentary and market speculation will likely push traders even further into the sidelines making volumes even lighter."

Federal Reserve building, Washington
Analysts are split on whether the US Federal Reserve will raise interest rates this weekReuters

South Korean shares declined, with the Kospi easing 0.8% to 1,925.34 points, while Hong Kong's Hang Seng edged down 0.1% to 21,482.22. Australia's S&P/ASX 200 bucked the region's trend, however, advancing 0.4% to 5,088.90 points. Shares in Woodside Petroleum were down 1.1% after Papua New Guinea's Oil Search rebuffed an $8bn (£5.2bn, €7.1bn) takeover bid from the Australian firm, saying it was "highly opportunistic and grossly undervalues the company".