UPDATE:Asian Shares Mixed; Investors On China Watch

SINGAPORE -- Asian shares were mixed Tuesday, with many markets supported by the mild gains in the Shanghai stock market, even though investors were cautious after a slip on Wall Street.

Investors were taking their cue from Chinese stocks, after the 6.7% tumble for the Shanghai Composite Index on Monday dragged the rest of the region lower.

The Shanghai Composite Index was up 0.3% while Japan's Nikkei 225 was up 0.7%, South Korea's Kospi rose 0.9% and Australia's S&P/ASX 200 was up 0.3%. Dow Jones Industrial Average futures were recently 29 points higher in screen trade.

"China will be the biggest concern today," said Mizuho Securities market analyst Yukio Takahashi. There was some concern in early trade that Chinese stock markets could be hit by the release of weak Purchasing Managers Indexes but those worries proved unfounded.

The China Federation of Logistics & Purchasing's PMI rose to a 16-month high of 54.0 in August from 53.3 in July, above the boom-bust 50 market for the sixth-straight month. The HSBC China Manufacturing PMI - previously issued by CLSA Asia-Pacific Markets as the CLSA China PMI - rose to 55.1 in August from 52.8 in July.

Chinese markets were consolidating amid concerns that big initial public offerings taking place in coming weeks as well as tightening credit would put a strain on liquidity. "I think the Shanghai index will stabilize in coming sessions, as the recent drops and more consolidation gradually prices in the worries," said Jacky Zhang at Capital Securities.

Technology stocks were higher in Korea after recent encouraging results from U.S. technology companies, with Samsung Electronics up 1.4% and Samsung Electro-Mechanics up 5.3%.

Taiwan shares were also driven higher by technology counters with Hon Hai Precision up 6.3% on its strong second quarter net profits announced Monday. Quanta Computer was up 4.0% while Compal Electronics rose 1.5%.

Shipping and steel stocks were lower in Tokyo, with Mitsui O.S.K. Lines down 2.2% and JFE Holdings 0.6%.

In Australia, ANZ was up 1.9% as brokers upgraded their target prices for the stock, though materials and energy stocks were mixed despite falling commodity prices, with BHP Billiton up 0.4% and Woodside Petroleum 1.1% lower.

Southern Cross Equities director Charlie Aitken said that U.S. bond yields were pricing in a protracted economic recovery, not the V-shaped recovery assumed by equity markets.

"The investing world has to start seeing genuine evidence of recovery, not just stability, for this rally to extend in the short term," said Aitken. "My view remains that cyclical stocks are too far ahead of the data recovering and the bond market is trying to tell you that."

Investors in Australia were awaiting the outcome of the Reserve Bank of Australia's policy meeting Tuesday. Most were expecting no change in interest rates but were keen to hear the tone of the central bank's statements.

Hong Kong's Hang Seng Index was up 0.6%, Taiwan shares were 2.1% higher and New Zealand's NZX-50 was 1.0% lower. Singapore's Straits Times Index was up 0.9% while Malaysia's Kuala Lumpur Composite Index slipped 0.2% and Philippine shares fell 1.2%. Indonesia shares were down 0.2% and Thailand shares were 0.5% higher.

Foreign exchange markets were in tight ranges, though the yen was a little weaker due to slightly improved risk appetite. The U.S. dollar was at Y93.06, from Y92.98 in New York, while the euro was at Y133.44, from Y133.25 and $1.4336, from $1.4333.

Tsuyoshi Okada, managing director at Gaitame.com Research Institute, said after Japan's weekend election led to "some yen-buying on optimism over the change in leadership," the focus was back squarely on overseas data.

Japan government bonds were tracking gains in U.S. Treasurys, with the lead September futures at 139.17 points, up 0.04. The 10-year yield was at 1.305%, up 0.5 basis point.

Base metals were pressured by Monday's weakness in share markets, particularly in China, with LME metals resuming trade after a holiday in the U.K. Monday. LME three-month copper was down $159 at $6,315 per ton from the London kerb on Friday.

Westpac senior commodity analyst Justin Smirk said the Shanghai Composite index was a proxy for risk appetite more broadly in commodity markets. "When the Shanghai Composite wobbles, it hits commodities after prices have run up so high so quickly. It's fairly clear that the long-term story is very much intact, but not so for the short term."

Analysts held similar views crude oil's price trends. "This week, crude oil may be very influenced by stock markets - especially China," said Ken Hasegawa, Commodity Derivative Sales Manager of Newedge Japan. Nymex October crude oil futures were up 25 cents at $70.21 per barrel on Globex.

Spot gold was down 20 cents at $952.00 per troy ounce from New York.