China's shares ended lower Monday, as an initial measure of the nation's manufacturing activity showed the economy was still in sluggish territory while recent market gains put most stocks under profit-taking pressure.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.8%, or 18.27 points, at 2388.59. The Shenzhen Composite Index fell 1.8%, or 16.90 points, to 944.87.

"The latest data show that China's economy is still in a downturn and lacks upward momentum. But the slowdown is under the government's control," said Zhang Gang, an analyst at Central China Securities.

"[As such], the market's interpretation of today's HSBC PMI figure is that in the short term the Chinese government is not likely to take aggressive stimulus action," he said.

The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rose to a two-month high of 49.1 in April compared with a final reading of 48.3 in March, according to HSBC Holdings PLC.

It's the sixth straight month that the leading indicator showed a contraction in manufacturing activity. A reading below 50 indicates contraction from the previous month, while anything above that indicates growth.

Analysts also attributed the decline in the broader market to profit-taking following a 3% gain in the benchmark Shanghai index in the last three sessions, but added that they expect China's shares to consolidate with an upward bias in the short term.

In terms of economic fundamentals, "the worst may be behind us," said Great Wall Securities analyst Wang Ping, adding Beijing's policy stance will likely remain pro-growth in the run-up to a key leadership transition expected to take place later this year.

Cement makers were among the day's big gainers on increasing demand as the second quarter is traditionally high season for construction. Sichuan Shuangma Cement rose 3.3% to CNY8.74 and Huaxin Cement gained 2.9% to CNY15.98.

Brokerages were mostly down on profit-taking. Citic Securities fell 2.2% to CNY13.21 after a 5.6% gain over the past three days and Everbright Securities lost 3.1% to CNY13.62 after a 10% surge over the same period.

Bucking the broader market's downward trend, U.S. dollar- and HK dollar-denominated B shares gained sharply, indicating foreign investors are regaining confidence in China's economy, said Wang.

Among actives, Jinjiang International Travel jumped 4.9% to US$1.119, and Boshi Electronic Glass added 2.8% to HK$6.32.

"To some extent, foreign investors are more forward looking. So the sharp gains in B shares may bode well for yuan-denominated A shares," said Wang.(wsj)