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Asia stocks mixed on political tensions, ECB rate cut hopes

Asian equities were mixed on Tuesday as investors reacted to the latest flare-up of tensions in the South China Sea and the prospect of further monetary easing in Europe.

Early on Tuesday, Reuters reported that the head of Vietnam's coastguard accused China of sinking another one of its fishing vessels in the disputed waters of the South China Sea. There has been no immediate comment from Beijing regarding the incident.

Meanwhile, expectations for a rate cut from the European Central Bank (ECB) rose after president Mario Draghi said in a speech on Monday that the central bank must be prepared to take action if risks posed by low inflation emerge.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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Nikkei 0.2% higher

Japanese shares ended at a fresh seven-week high for the second day in a row, posting a fifth session of gains, as the yen traded near a one-week low against the dollar.

Read MoreIs this the Nikkei's last hurrah before the fall?

Sony ended 0.1 percent higher following a 1 percent rally earlier in the session after CEO Kazuo Hirai said on Monday that the firm is betting on network services like streamed games and movies to help drive growth.

Fuji Heavy Industries rallied 1 percent after the Nikkei newspaper reported that the maker of Subaru cars expects to beat its midterm-term earning projection.

"Perhaps the strength in Japanese equities is more a factor of positioning ahead of some key events for Japan heading into the back end of the week [retails sales data on Thursday and inflation data on Friday]. Some traders have suggested the fact that the Nikkei is trading through the top band of the Ichimoku cloud is encouraging some near term buying," said Stan Shamu, market strategist at IG.

China shares decline

News that China is simplifying procedures for investment projects was unable to lift sentiment in mainland and Hong Kong markets. The Shanghai Composite snapped its two-day winning streak to close 0.3 percent lower while the Hang Seng Index dipped 0.2 percent

In a move to reduce bureaucracy, the National Development and Reform Commission said on Monday that authorities should not arbitrarily delay approval deadlines for investment projects.

Property developers rallied in Shanghai on hopes of further policy easing; Vanke and Poly Real Estate jumped 1 percent each.

Read More'Abundantly wrong' to expect correction: Gartman

ASX flat

Australia's benchmark index retreated from a one-month high hit earlier in the session after data showed consumer confidence fell 1.1 percent in the week ending May 25 following the government's tough federal budget.

Suncorp lost 2 percent after warning of a A$500 million writedown in its life insurance business.

Treasury Wine Estates fell 1 percent after hinting that it will not engage with Kohlberg Kravis Roberts after its board sent a letter to shareholders explaining the rationale for rejecting the private equity's firm $3.05 billion bid.

Rio Tinto rose 0.4 percent after its deal with Chinalco and the International Finance Corp for the $20 billion Simandou iron ore project in Guinea finally received approval after repeated delays.

Kospi down 0.6%

South Korean shares fell to a two-week low, extending losses into a second session, after the Bank of Korea's consumer sentiment index fell to an eight-month low in May.

"We think the 3-point fall from April is the first evidence of a macro impact in May from the Sewol disaster. The May statement said the committee would be closely monitoring the movements in domestic demand following the Sewol ferry accident," said Tim Condon, head of research, Asia at ING Financial Markets.

Automakers underperformed, with Hyundai Motor and Kia Motors down more than 2 percent each.

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