Chinese markets higher despite factory data

Chinese shares were higher in thin holiday trade despite manufacturing data that showed a weaker picture of the world's second largest economy.

Activity in China's factory sector shrank for the first time in seven months in December.

The final HSBC/Markit Purchasing Managers' Index (PMI) was at 49.6, just below the 50 level that separates growth from contraction.

The number was slightly higher than a preliminary "flash" reading of 49.5.

But, it was still down from the final reading of 50 in November.

Investors shrugged off the latest data with Hong Kong's Hang Seng index closing up 0.4% to 23,605.04 in a shortened half day of trade.

The benchmark index gained 1.3% this year, but that pales in comparison to the Shanghai Composite, which rose around 50% in 2014.

The mainland index was up 2.17% to 3234.68 at its close.

Shares of the world's biggest trainmakers China CNR and CSR jumped on news that they will merge, creating a super conglomerate that will compete with the likes of Germany's Siemens and Canada's Bombardier for global rail deals.

Hong Kong listed China CNR shares skyrocketed 45%, while CSR was higher by more than 32%.

Australian shares ended down on New Year's Eve in thin trade as Japanese and South Korean markets were closed for the holidays.

The benchmark S&P/ASX 200 was lower by 0.1% to 5,411, tracking losses on Wall Street overnight.

The Dow Jones fell 0.4% to 17,973.48, while the S&P 500 lost 0.5% to 2,080.51, moving away from the record highs hit this week.

Both Australian and Hong Kong markets will be closed for New Year's day on Thursday. They will reopen on Friday.