China shares are up fractionally as a rebound shows signs of taking hold, while elsewhere Asian shares tracked Wall Street's losses early Friday.

The Shanghai Composite is up 0.2% at 4131.94, while the smaller Shenzhen index is up 0.7% to 2368.49. The small-cap ChiNext board is up 0.5% at 2983.24.

On Friday, an early gauge of China's manufacturing activity for July fell to a 15-month low. The preliminary Caixin manufacturing purchasing managers index fell to 48.2 in July compared with a final reading of 49.4 in June. A reading below 50 indicates contraction.

The Shanghai Composite, still down about a fifth from its June highs, would still need to rise roughly 9% before reaching 4500. Brokerages are expected to continue buying as long as it stays below that level, which is helping prop the market.

David Welch, managing director at Reorient Financial, said that local analysts estimate state-backed China Securities Financial Corp. has spent roughly one trillion yuan ($160.9 billion) out of an estimated two trillion credit line, to support the market.

During the stock rout, China Securities Regulatory Commission said the central bank would inject capital into state-owned CSF Corp. to expand brokerages' business of financing investors' stock purchases. The securities commission said later that CSF Corp. was extending a 260 billion yuan ($42 billion) credit line to 21 securities firms to buy stocks.

Authorities haven't disclosed the total amount that CSF is spending to buy equities.

One bright spot is that major shareholders appear to be buy rather than just holding on to shares. Earlier this month, regulators had blocked shareholders and company executives with stakes of more than 5% from selling shares for six months.

But worries remain. The government has said it is moving to clamp down on gray-market margin financing, which could push down the market. Analysts have estimated that hundreds of billions of yuan from unofficial margin lenders helped fuel that yearlong rally to mid-June.

Official margin lending provided by Chinese brokerages stood at 1.5 trillion yuan as of yesterday, down 36% from a record 2.3 trillion on June 18, according to Wind.

Mr. Welch added that if the Shanghai index retraces 50% of its selloff, it would rise to roughly 4276 by the end of the month.

Elsewhere, Japan's Nikkei Stock Average was down 0.4%, South Korea's Kospi fell 0.7% and Australia's S&P ASX 200 was flat.

Overnight, U.S. stocks slid in the wake of disappointing earnings and outlooks from 3M Co. and Caterpillar Inc.

"Earnings growth is more of a problem for the U.S. than Japan, but the run up in Japanese shares this year (more than 18.5% year-to-date for the Nikkei) makes it clear that projected earnings on the Japan side may not be able to sustain much higher stock prices," said Barclays chief Japan equity strategist Hajime Kitano.

"Given annual earnings growth in the low- to midteens, the Nikkei may very well trade largely flat for the remainder of the year," he added.

The Japanese yen was last at ¥ 123.85 against the U.S. dollar, from ¥ 123.91 late yesterday in New York.

Gold prices are close to a five-year low Friday given a broadly strengthening U.S. dollar and expectations of a rise in U.S. interest rates. Spot gold fell to $1,085.47, down from the opening price of $1,090.62.

Oil prices sank into a bear market Thursday in the U.S. as a global glut of crude shows little sign of abating. Brent crude futures are up 31 cents at $55.58 a barrel early in Asia, after settling at to $55.27, its lowest level since April 2.

Write to Chao Deng at Chao.Deng@wsj.com

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