Hong Kong stock display
China's stock markets saw a dramatic plunge last weekReuters

Asian stocks were trading lower on 31 August as investors braced for more market volatility in China.

The Shanghai Composite fell 1.2% to 3,194.64 at mid-day after the Financial Times reported over the weekend that Beijing had decided to abandon large scale share purchases, and that it had opted instead to target and punish those suspected of "destabilising the market".

The Xinhua news agency said 197 people had been caught and punished by Chinese authorities for spreading "online rumours" about China's stock market and the deadly explosions in Tianjin. The benchmark index shed more than 16% in last week's trade before regaining some ground with a late rally, as concerns over China's slowing economy rattled global markets.

Shares in Hong Kong followed the mainland lower, with the Hang Seng index down by 0.2% at 21,573.91 points.

Rest of Asia

Remarks from Federal Reserve vice chairman Stanley Fischer that a September interest rate hike from the US central bank is not out of the question also weighed on investor sentiment in the region.

The region's largest stock market, the Nikkei, dived 1.3% to 18,890.48 after official data showed Japan's industrial production unexpectedly declined in July amid sluggish global demand.

Output slid 0.6% from the previous month following a 1.1% gain in June, belying analyst forecasts for a 0.1% rise.

"Production is sluggish because private consumption and exports remain weak," Toru Suehiro, an economist at Mizuho Securities, told Bloomberg. "Concern about China and emerging economies is posing a risk to output."

South Korean shares bucked the region's trend, with the Kospi index advancing 0.2% to 1,941.49. In Australia, the S&P/ASX 200 was down by 1.1% at 5,207 points.