China shares fell Monday amid more signs of weakening in the Chinese economy, but markets in the rest of the Asia region rallied a second straight trading day.

The Shanghai Composite Index SHCOMP, +0.80% finished down 1.8% at 2688.85, after Chinese officials reported that the country’s manufacturing purchasing managers index fell to 49.4 in January, marking the sixth-consecutive month of contraction and its lowest level since August 2012. The Hang Seng Index was last down 0.6%.

Still, Japan’s Nikkei Stock Average NIK, +0.11% powered ahead by nearly 2%, adding to its 2.8% surge on Friday when the Bank of Japan surprised investors by cutting interest rates to negative territory. The market also rose amid several solid earnings results.

Its gains helped lead S&P/ASX XJO, -0.04% up 0.8% and South Korea’s Kospi 180721, -0.03% up 0.7%.

A mixed performance in the region comes as investors weigh the potential for more quantitative easing from central banks around the world and the latest moves by Japan, against an environment of persistently lower oil prices and slowing in China.

“Financial markets are now watching how Beijing will respond to Tokyo’s decision,” Niv Dagan, executive director at Peak Asset Management, wrote in a note. The firm doesn’t believe China will embark on a “major currency devaluation” although “pressure is mounting from record capital outflows and fears the economy is slowing faster than expected.”

Investors worry the Shanghai index has yet to bottom out and analysts say the benchmark could fall as low as 2500 in the near term. Chinese stock markets are in their last week of trading before the weeklong holiday for the Lunar New Year.

China’s PMI reading was down from 49.7 in December and missed the median forecast of 49.6 by economists polled by The Wall Street Journal. A figure above 50 indicates an expansion in manufacturing activity while a reading below that level points to a contraction.

A private gauge of Chinese manufacturing by Caixin edged up to 48.4 in January, from 48.2 in December, although it indicated contraction as well.

China’s manufacturing sector faces “even more challenges this year as the government plans to reduce excess industrial capacity and clean up unprofitable ‘zombie companies’ that survive on bank loans and government subsidies,” Mr. Dagan wrote.

The weakness in Monday’s China data was mirrored in gauges out Monday from Taiwan and South Korea. In South Korea, data showed exports down 18.5% in January, the steepest fall since the global financial crisis and marking the 13th month of declines.

Brent crude oil prices were last down 2.2% at $35.19.

Meanwhile, the Japanese yen USDJPY, +0.07% weakened 0.1% to ¥121.16 per one U.S. dollar, a move that helps the competitiveness of Japanese exporters. The local currency touched its weakest level against the U.S. dollar in a month-and-a-half on Friday.

The Chinese yuan offshore and Korea won were also weaker, each by 0.1% against the U.S. dollar. Chinese authorities fixed the Chinese yuan slightly stronger at 6.5539 to one U.S. dollar, compared with 6.5516 previously. It had guided the currency weaker for six sessions in a row.