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Asian Stocks Close Mostly Lower, China Makes Strong Gains

Asian stocks finished mostly lower Monday, taking a breather after four straight weeks of gains. The Shanghai Composite Index closed 2% higher and South Korea ended a touch stronger after spending most of the day in negative territory. Australia finished weaker. A public holiday in Japan kept the yen subdued. Markets there were closed for a holiday and will reopen Tuesday.

News last Friday that Britain's financial authorities had stepped in to rescue mortgage lender Northern Rock , which fell victim to the sharp rise in borrowing costs between banks, renewed worries about the credit market. But hopes are high that the Federal Reserve will cut its benchmark fed funds rate by at least 25 basis points at its policy-setting meeting on Tuesday to help take the heat off those credit concerns.

South Korea's KOSPI ended with slight gains, though it spent most of the session in the red. Retailers and other stocks sensitive to domestic demand such as Kookmin gained on data showing a surge in retail sales, reinforcing confidence about robust economic growth at home. But trading was light ahead of the Federal Reserve's policy meeting on Tuesday, which is widely expected to result in lower U.S. interest rates, although there is uncertainty about the size of any move.

Australia's S&P/ASX 200 Index finished 0.6% lower as renewed worries about credit markets saw financial shares such as Macquarie Bank come under pressure.

Hong Kong stocks finished 1.2% lower as property stocks slipped on profit-taking after reaching consecutive records last week, ahead of a government land auction for a site in Tai Po.

Singapore's Straits Times Index was 1.7% lower. Shares of electronics maker Advanced Integrated Manufacturing fell as much as 26% after the company said that its group chairman and chief executive officer had been arrested by Singapore's white-collar police.

China's Shanghai Composite Index bucked the regional downtrend and rose 2%, bringing it back near its record high, despite the central bank's latest 0.27 percentage-point hike in deposit and lending rates, announced after the close on Friday. However, turnover in Shanghai A shares remained modest at 88.01 billion yuan ($11.7 billion), partly because a lot of money was tied up in China Construction Bank's record IPO, for which retail subscriptions were being taken on Monday.