The archipelago's anti-money laundering body said it was scrutinizing the country's online gambling industry to determine the impact on the economy if it stopped operating.

China has urged the Philippines to ban online gaming to support its crackdown on cross-border gambling. Online gambling companies are a boon for the local economy, drawing many visitors from China who work in them, fuelling property demand and retail spending.

Lack of positive catalysts coupled with negative sentiments in the property sector after China's urge to ban online gambling hurt risk appetite, said Rachelle Cruz, a research analyst with AP Securities.

The benchmark stock index <.PSI> closed 1.8% lower, with Ayala Land and Ayala Corp shedding 3.4% and 1.9% respectively.

Indonesian shares <.JKSE> gained 1% to a one-week closing high, helped by financial and consumer sectors.

Risk sentiment was boosted as the government's decision to relocate the capital city from Jakarta solidified confidence that it would walk the talk on stimulus proposed in the 2020 budget draft, said Andrey Wijaya, a senior analyst at RHB Sekuritas Indonesia.

Ten days after unveiling a $177.71 billion budget for 2020, the government said it would relocate the capital to the island of Borneo and it would cost about $32.79 billion.

The government also promised to focus on investments in infrastructure, human resources and social security.

Among gainers, Unilever Indonesia and lender Bank Rakyat Indonesia (Persero) added 3.1% and 3.2%, respectively.

Thai shares closed about 0.5% lower, weighed down by telecoms and financials. True Corp fell 2.4%, while Kasikornbank PCL lost 1.9%.

Thailand's manufacturing production index in July dropped 3.23% from a year earlier, a greater fall than expected, dragged down by lower production of cars, petroleum and steel.

Malaysian shares <.KLSE> fell to their lowest close in nearly four years, hurt by losses in financials.

Lender Hong Leong Bank and financial services provider Hong Leong Financial Group lost 2.9% and 4.4%, respectively.

(Reporting by Soumyajit Saha; Editing by Subhranshu Sahu)

By Soumyajit Saha