“Sentiment is severely battered by a string of negative news,” Zhang Gang, an analyst at Central China Securities. - File photo

HONG KONG: Asian shares edged higher Monday on the back of a strong Wall Street rally, but Chinese stocks plunged to a new three-year low after growth in the world's second-largest economy slowed.

Hong Kong's benchmark Hang Seng index closed up 0.15 per cent, or 28.71 points, at 19,121.34, while Sydney finished 0.56 per cent, or 22.9 points, higher at 4,105.1, with resource stocks leading the way.

But the Shanghai Composite Index slumped 1.74 per cent, or 37.94 points, to 2,147.96, its lowest level since March 2009.

Tokyo was closed for a public holiday.

Official data released Friday showed the Chinese economy expanded 7.6 per cent in the second quarter year-on-year, its slowest pace for more than three years as it was hit by ripples from the eurozone debt crisis and slow US recovery.

Chinese Premier Wen Jiabao warned Sunday that while there was “a lot of dynamism and momentum for economic growth”, China's “economic rebound is not yet stable and economic hardship may continue for a period of time”.

In the depths of the global financial crisis at the start of 2009 China's economy grew at a rate of 6.6 per cent.

Beijing's full-year growth target is 7.5 per cent.

“Sentiment is severely battered by a string of negative news,” Zhang Gang, an analyst at Central China Securities, told Dow Jones Newswires. “In their latest remarks, neither Premier Wen Jiabao or Vice Premier Li Keqiang has revealed details about how the governments will boost growth.”

But elsewhere, stocks were lifted after US markets broke a six-day losing streak on Friday following better-than-expected figures from banking giant JP Morgan Chase, which announced a $5 billion second-quarter profit even after accounting for $4.4 billion in trading losses.

The Dow closed up 1.62 per cent, or 203.82 points, at 12,777.09, the S&P 500 rose 1.65 per cent and the tech-rich Nasdaq 1.48 per cent.

Despite the evidence of slowing Chinese growth, Justin Harper, market strategist for IG Markets Singapore, told AFP: “The Chinese GDP data... came better than expected.”

JP Morgan's figures, he added, sparked hopes of “a better than expected earnings season across the board for the big banks”.

Traders were also looking to US Congressional testimony from Federal Reserve chairman Ben Bernanke on Tuesday and Wednesday for any hint on a third round of quantitative easing, DBS Group Research said in a report.

“As far as the market is concerned, it is a question of 'not if, but when'

the Fed will move towards a third round of quantitative easing measures or

QE3,” the report said.

European shares opened weaker on Monday, with London's FTSE 100 index down 0.18 per cent, the DAX 30 in Frankfurt 0.09 per cent lower, and Paris' CAC 40 off 0.17 per cent.

The US is China's biggest trading partner and on currency markets the dollar advanced against the euro, with the single currency fetching $1.2222 in afternoon Asian trade compared to $1.2248 in New York on Friday.

The euro also slipped against the yen, buying 96.63 yen from 97.08 yen, while the US dollar traded at 79.04 yen from 79.17 yen.

Oil was lower after Saudi Arabia and the United Arab Emirates opened crude pipelines bypassing the Strait of Hormuz, which Iran has repeatedly threatened to close as it rows with the West over its nuclear programme, easing supply concerns.

New York's main contract, light sweet crude for August delivery, shed 43 cents to $86.67 a barrel in the afternoon, while Brent North Sea crude for delivery in August was down $1.06 to $101.34.

Gold was worth $1,586.22 an ounce at 0825 GMT, compared with $1,583.22 on Friday.

In other markets:

-- Seoul was up 0.27 per cent, or 4.90 points, at 1,817.79.

-- Taipei fell 0.20 per cent, or 14.23 points, to 7,090.04.

Taiwan Semiconductor Manufacturing Co closed 0.40 per cent lower at Tw$75.5 while Hon Hai Precision added 0.57 per cent at Tw$87.5.

-- Manila rose 1.60 per cent, or 83.47 points, to 5,277.99.

Philippine Long Distance Telephone Co. added 2.4 per cent to 2,766 pesos and Metropolitan Bank and Trust Co. rose 3.5 per cent to 98.30 pesos.

-- Wellington fell 0.80 per cent, or 28.07 points, to 3,467.34

Telecom Corp was down 3.1 per cent at NZ$2.47, Fletcher Building off 1.7 per cent at NZ$5.88 and Air New Zealand down 1.1 per cent at NZ$0.875.

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