Stocks drop 0.6%, despite upbeat manufacturing data

China's key stock index closed down 0.6 percent Wednesday, reversing slight gains earlier in the day, with investors selling off small caps which had outperformed the broad market in a recent rally.

The Shanghai Composite Index finished at 2,622.9 points, paring brief gains made following data showing China's manufacturing sector picked up after slowing for several months.

Dingsheng Tiangong Construction Machinery Co was the biggest loser on the Shanghai bourse, falling about 7 percent after jumping 120 percent over the last month.

Analysts said despite the stream of profit-taking in the afternoon the index was unlikely to break below the key resistance level of 2,558 points, the 60 day-moving average, which has provided firm support over the past two months.

HSBC's purchasing managers' index (PMI) rose to a three-month high of 51.9 in August from 49.4 in July. A PMI produced by the China Federation of Logistics and Purchasing (CFLP) also rose to 51.7 from 51.2.

Source: Global Times