Asian stocks were under pressure on Wednesday as concerns rose if a bailout deal was still possible for Cyprus while Greater Chinese shares ignored the news to outperform the market as attention turned to domestic issues.
The Hang Seng Index rebounded from a three-month low and mainland shares closed at a one-week high. Meanwhile, Seoul's Kospi hit a one-month low and Australia's benchmark S&P ASX 200 clawed back losses to end above a five-week low.
Japanese financial markets were shut on Wednesday for a public holiday.
Investors are hoping that Cypriot Finance Minister Michalis Sarris' last-minute trip to Russia in search of bailout 'plan B' will secure the island nation's financial rescue after lawmakers soundly rejected a plan to levy bank deposits.
Without external funds, investors worry that the Cyprus's banks may collapse, triggering fears of a potential euro zone spillover. However, experts tell CNBC that Cyprus's relatively small economy - less than 1 percent of total European gross domestic product (GDP) - is unlikely to trigger another debt scare.
"This [Cyprus] is a headline that will last a couple of days and will more than likely be a buying opportunity for equities," said Jack Bouroudjian of Bull and Bear Partners on CNBC's "Asia Squawk Box."
Markets are also eyeing the outcome of the U.S. Federal Reserve's two-day meeting. Investors will be watching for any signs that the central bank could start winding down its quantitative easing program as the economic recovery gathers pace.
Greater China Outperforms
Financials boosted Hong Kong and mainland markets with China Minsheng Bank leading gains in Shanghai by 6.7 percent and Industrial and Commercial Bank of China jumping 2.7 percent in Hong Kong.
Investors bought into banking stocks after reports surfaced that China's Banking Regulatory Commission may write off a deposit tax for lenders, which would free up more capital.
The Shanghai Composite crossed the 2,300-mark to rally 2.6 percent, it's highest closing level in over a week.
The Hang Seng Index is down over 2 percent since the start of 2013, under performing the Asia-Pacific region. However, one Reuters poll of 450 analysts suggests the benchmark may see an upside of 13 percent by year-end.
"Historically speaking, the highest valuation for the Hang Seng happened back in October 2007 when it hit 31,958. P/E ratio at that time was 24. Now, it's 11 times forward. I don't see that much upside, even in a really bullish market," said Dickie Wong of Kingston Securities on CNBC's "The Call."
Markets are awaiting China's HSBC Flash PMI data for the month of March on Thursday. February's reading revealed a sharp fall in manufacturing activity and if March's figures show an improvement, both Hong Kong and mainland shares are likely to extend gains
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Resources Hurt ASX 200
In Sydney, resources were the worst-hit sector after copper prices neared a seven-month low overnight. Adding to weakness was a downgrade from Goldman Sachs in their outlook for big miners due to concerns of oversupply in iron ore markets.
Resources have weighed on the benchmark in the past week on concerns over softer commodity prices as China's steel production wanes. "We think that concerns about the outlook for iron ore are a little exaggerated at this point," said Malcolm Wood, Head of Investment Strategy at Morgan Stanley on CNBC's "Cash Flow."
The benchmark index has been steadily retreating since the beginning of March, when it crossed the 5,100 level to scale a four-and-half-year peak.
Seoul shares closed at its lowest level in a month, dragged down by a 1 percent slump in shares of Samsung Electronics after reports surfaced that the tech giant is working on a wearable digital device similar to a wristwatch.
Major exporter stocks reversed gains after the Korean won came off a fresh six-month low against the U.S dollar. Automaker Hyundai Motor erased the session's gains to close down 0.2 percent..
Exporters are usually the first to benefit from swings in currency movements as any strengthening in the won decreases the value of their repatriated earnings.