Asian stocks put up a mixed performance on Thursday, as investors kept a wary eye on China which recovered from the prior day's sudden sell-off. Small-caps in the mainland, in particular, attracted strong buying interest.
However, weakness in commodity prices, an uninspiring lead from Wall Street and caution ahead of the European Central Bank's policy meeting later in the day kept a lid on risk appetite.
"Global investors are taking a wait-and-see stance before the ECB event, as depending on the outcome the euro could move sharply," Hikaru Sato, a senior technical analyst at Daiwa Securities, told Reuters.
Major U.S. averages finished lower overnight, pulled down by insurers and healthcare plays as well as a mixed bag of corporate earnings. The tech-heavy Nasdaq Composite dropped 0.8 percent, while the and S&P 500 closed down 0.3 and 0.6 percent respectively.
In the energy space, global oil prices slid more than 2 percent to three-week lows on Wednesday, chalking up a three-session losing streak, on worries over rising U.S. crude stockpiles.
Meanwhile, copper fell to near two-week lows in the previous trading session, hurt by oversupply woes and slowing demand growth from China.
Mainland stocks volatile
China's key Shanghai Composite index swung up in late-day trading to close up 1.5 percent, recouping some of Wednesday's 3.5 percent slump which took the index down to a near one-week low.
The CSI300 Index of the largest listed companies in Shanghai and Shenzhen also rose 1.5 percent, after shrugging off a weaker start.
On the other hand, investors rushed into small caps following the previous day's sharp sell-off. The Shenzhen Composite more than doubled gains to 3.7 percent while the start-up ChiNext board moved up 4.7 percent. The Nasdaq-style ChiNext index is one of the most volatile share benchmarks in China.
"It's uncertain what caused the selloff in Chinese markets yesterday. Was it rumors that the government was going to pull market support? Concerns about Sinosteel missing its interest payment? Or did we just see some profit taking after a 20 percent rise in the Shanghai Composite? I would lean towards a combination of the latter two," IG's market strategist Angus Nicholson wrote in a note.
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Hong Kong markets reopen for trade after being shut for the Chung Yeung Festival in the previous trading session. The benchmark Hang Seng index halved losses to end down 0.6 percent.
Shares of Air China and China Southern Airline were among the day's top gainers, up by the daily maximum allowable of 10 percent each in Shanghai, following a report by the Shanghai Securities News that both carriers are considering a merger. The Hong Kong-listed stocks of both airlines soared 7.9 and 8.5 percent respectively.
Meanwhile, shares of Hong Kong-listed Real Nutriceutical Group tanked 8.3 percent after U.S.-based Glaucus Research Group California released a report on Thursday which said the company's "sales and net income are substantially less than reported to investors and regulators in the Company's Hong Kong filings."
Glaucus has a strong sell rating on the stock.
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Nikkei drops 0.6%
The rally in Japan lost steam, with the benchmark Nikkei 225 stepping back from Wednesday's six-week highs.
Expectations for further stimulus from the Bank of Japan (BOJ) had taken the Tokyo bourse on an upward ride in the recent sessions.
Among decliners, Fast Retailing tanked 1.4 percent, while other retailers Aeon and Seven & i Holdings dropped 1.2 and 0.6 percent respectively.
Stocks with exposure to China were mixed; steel producer JFE Holdings surged 3 percent but Japan Steelworks slipped 0.4 percent. Construction equipment makers Komatsu and Hitachi Construction Machinery sagged 0.3 and 0.8 percent respectively.
Nidec shares fell 1.3 percent, reversing from an earlier rally after the components maker said it was increasing capital spending to meet stronger demand for touch technology used in Apple's iPhones.
Bucking the weakness, Hitachi High-Technologies bounced up over 5 percent after its customer Intel said it is looking to invest $5.5 billion in making semiconductors in China.
ASX adds 0.3%
Australia's S&P ASX 200 index recovered early losses to end higher, as battered energy counters got a rare lift from a rally in Santos shares.
The oil and gas producer surged 16.2 percent to A$6.270, coming off an intra-day high of A$6.560, following news that it had rejected a A$7.1 billion ($5.1 billion) takeover proposal from U.S.-based fund manager Scepter.
Oil Search and Woodside Petroleum advanced 1.6 and 0.8 percent respectively.
However, losses in the commodity space capped the resource-heavy index's rebound. Miners BHP Billiton and Rio Tinto eased 0.5 and 0.2 percent respectively, while Oz Minerals retreated 2.7 percent.
Gold producers weren't spared from the meltdown after spot gold posted its biggest one-day loss in three weeks on Wednesday. Kingsgate Consolidated and Evolution Mining tumbled 5.5 and 4.6 percent respectively, while Newcrest Mining fell 3.9 percent.
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Kospi loses 1%
South Korea's Kospi index widened losses as investors digested earnings announcements by major companies.
Hyundai Motor plunged more than 2 percent after announcing a 23 percent fall in third-quarter net profit from a year ago, but shares recovered lost ground in late-day trading to eventually close down 0.6 percent.
SK Hynix sold down 5.1 percent, hurt by worries over Intel new memory investment in China and Western Digital's acquisition of SanDisk. The chipmaker's July-September operating profit met expectations with a rise of 6.3 percent from a year earlier.
The biggest loser was Samsung Engineering, which tumbled nearly 20 percent after the company posted a record 1.5 trillion ($1.3 billion) quarterly operating loss. The construction arm of Samsung Group also said it plans to sell new shares in a rights offering to improve its finances.
On the other hand, the bourse's top weighted stock Samsung Electronics bounced up 0.8 percent on the back of a report by the Korea Economic Daily that it is considering a share buyback.
Taiex flat
Taiwan's weighted index finished little changed, a day after profit-taking and caution ahead of third-quarter earnings by tech majors led the bourse lower.
Shares of smartphone maker HTC staged a comeback, up 4.4 percent, after sliding over 4 percent following the unveiling of its new One A9 mid-tier handset.
Eva Airways and China Airlines closed up more than 2 percent each, helped by cheaper fuel prices.
In other news, Taiwan's unemployment rate ticked up slightly to 3.79 percent in September, data from the Directorate General of Budget, Accounting and Statistics showed on Thursday, against August's 3.74 percent.
Markets in India are closed for the Dussehra holiday.