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Trading in Asia was lackluster Thursday, as investors grew more wary about a multiweek stock rally that is rapidly losing steam.

Hong Kong's Hang Seng Index was down 0.5%, while the Shanghai Composite Index was down 0.3%. Australia's S&P/ASX 200 was roughly flat.

A few markets in the region were closed for holidays, including South Korea and Japan, making for a quiet day of trading.

Investors were mostly focused on data showing that Chinese services activity expanded in April, albeit at a slower pace than in March. The Caixin China services purchasing managers index slipped to 51.8 in April from 52.2 in March. A reading above 50 indicates an expansion.

Stocks in Hong Kong pared losses after the release of the PMI data and the Australian dollar edged up against the U.S. dollar.

Still, "it will be a concern that despite a large injection of liquidity [by Chinese authorities], the service sector isn't booming," said Andrew Sullivan, managing director at brokerage Haitong International in Hong Kong.

Analysts said that Beijing will be expected to keep implementing moderate stimulus given the economy still faces relatively strong downward pressure.

Meanwhile, energy shares in the region were mixed.

In Australia, shares of BHP Billiton continued to fall—a 2.8% loss on top of Wednesday's 9.4% drop. BHP, Vale and their Samarco Mineraç ã o joint venture face a 155 billion real (US$43.68 billion) claim by Brazilian federal prosecutors for liabilities stemming from a dam disaster last year.

Still, the energy sector was up 1% on the S&P/ASX 200, broadly bouncing back from steep losses on Wednesday.

Investors in Australia also factored in data showing that the country's trade deficit narrowed to 2.16 billion Australian dollars (US$1.61 billion) in March, compared with a deficit of A$3.04 billion in February. The value of exports rose 4% in March from February, while the value of imports rose 1% in the same period. Separately, Australian retail sales rose 0.4% in March from a month earlier.

Shares of National Australia Bank were up 2.8% after the firm reported earnings for the first half of the year that were broadly in line with analysts' expectations. The bank reported a net loss of A$1.74 billion in the six months through March from a profit of A$3.44 billion a year earlier amid its exit from the U.K. banking business.

Dominique Fong, James Glynn and Robb M. Stewart contributed to this article.

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

(END) Dow Jones Newswires

May 05, 2016 00:25 ET (04:25 GMT)

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