An industry group said on the weekend that China's purchasing managers' index, which reflects manufacturing activity, fell to 49.2 in August from July's 50.1 on a 100-point scale. Numbers below 50 show a contraction. It was the group's weakest reading to date.
That fueled doubts about whether China has started to recover from its deepest economic downturn since the 2008 global financial crisis. China's economic growth fell to a three-year low of 7.6 percent in the second quarter. Corporate profits and other indicators have fallen despite government stimulus measures.
"The numbers were really bad, and many people believe that the government will have to do something to increase liquidity," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
After a lower opening, Japan's Nikkei 225 index rose 0.4 percent to 8,877.83. Hong Kong's Hang Seng also reversed course, gaining 0.6 percent to 19,592.42. South Korea's Kospi gained 0.5 percent to 1,915.41. Australia's S&P/ASX 200 rose marginally to 4,319.50.
Many investors were also consoled by Federal Reserve Chairman Ben Bernanke's speech Friday in which he suggested that more central bank action was possible to support the U.S. economy.
Investors have been watching to see whether the Fed will buy more bonds to further lower long-term interest rates.
"Although Fed Chairman Bernanke did not categorically state that a third round of quantitative easing or QE3 is on the cards ... the prospects are more likely than not for more Fed balance sheet expansion," analysts at Credit Agricole CIB in Hong Kong said in a market commentary.
Shares in mainland China and Taiwan also rose. The two countries agreed to allow Taiwanese banks to handle China's yuan currency. Under the deal, signed by the two sides Friday, Taiwanese banks can take yuan deposits and convert yuan into the New Taiwan dollar, skipping the current process of first converting the yuan into U.S. dollars.
The Shanghai Composite Index rose 0.6 percent to 2,062.13. The smaller Shenzhen Composite Index jumped 1.7 percent. Taiwan's TAIEX added 0.8 percent.
Chinese property stocks jumped on speculation that the Chinese central bank will make more money available for investment. Shanghai-listed Poly Real Estate Group Co. surged 6.2 percent. Hong Kong-listed China Resources Land added 3.1 percent.
But Japan's Sharp Corp. dropped 3 percent after Kyodo News reported the struggling electronics maker was considering slashing employee bonus payments.
Benchmark crude for October delivery was down 8 cents to $96.39 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, crude rose $1.85 to end at $96.47 per barrel.
In currencies, the euro rose to $1.2578 from $1.2560 late Friday in New York. The dollar fell to 78.28 yen from 78.31 yen.