By Chao Deng

Stocks in Japan and China slipped Thursday as investors assessed the latest read on Chinese manufacturing activity.

The Hang Seng Index fell 0.3% to 23,333.18 and the Shanghai Composite lost 1% to 2,302.42 after HSBC's preliminary report on Chinese manufacturing activity came in at 50.4 in October, compared with 50.2 in September.

"Short term, investors seem to be in a 'good news is bad news' mood," said Ryan Tsai, Asia equity strategist at Standard Chartered. "A slight pickup in [purchasing managers index] may be interpreted as no major policy support ahead."

Still, reaction in the region was relatively muted given investors' expectation of slowdown signs from China. Earlier in the week, data showed China's economy grew at 7.3% in the third quarter compared with a year earlier, a slower pace from the second quarter but a touch faster than expected.

In Japan, the Nikkei Stock Average lost 0.4% to 15,138.96, a small move compared with a band of gains and losses of more than 2% each day this week. It was the least volatile session in a month and came amid relatively light volume of just 2 billion shares.

The dollar was at Yen107.21 when the market in Japan closed, a touch higher from Yen107.15 late Wednesday in New York.

Bargain hunters have helped shield Asian stocks from major losses amid global financial market volatility this month. Stocks in Japan have suffered most, losing more than 6% on the Nikkei month-to-date. But the Hang Seng Index in Hong Kong has pulled ahead as one of the best performers in the region with a gain of 1.8% this month. Australia's S&P ASX 200 , too, has gained 1.7% in October. Investors have been encouraged in part as volatility subsides globally -- in the U.S., investors have been waiting in the wings to buy stocks at lower prices, and trading has been calmer after wild swings last week.

In Tokyo, auto air-bag maker Takata Corp. lost 6.2% following news that U.S. federal prosecutors are investigating the firm in connection with defective air bags linked to two deaths.

Mitsubishi Motors fell 2.6% after the firm reported a 23% rise in first-half consolidated operating profit that missed expectations. The auto maker blamed higher costs.

In Hong Kong, China CNR shares hit a record high after the firm reached a $556.6 million deal to build 284 new cars for the Boston subway. The shares rose as much as 4% before paring gains, finishing up 3.2%. CNR's deal came as a statement from finance ministers attending this week's Asia-Pacific Economic Cooperation summit urged support across the region for greater investment in infrastructure, principally via public-private partnership.

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