Trading proved volatile in the afternoon Asia session Tuesday with markets see-sawing and in out of the black. Australia and South Korea ended lower, but a late turnaround pushed Japanese stocks out of the red with the Nikkei closing 1.1 percent higher.
Investors sold bank stocks across the region, with National Australia Bank, South Korea's Kookmin Bank and Japan's Mitsubishi UFJ all taking big hits. Worries about the financial sector flared up after Swiss Re, the world's biggest reinsurer, revealed a $1.07 billion writedown related to credit losses. Goldman Sachs then downgraded Citigroup to sell from neutral, saying the largest U.S. bank may have to write off $15 billion over the next two quarters as mortgage losses reduce earnings.
It was a volatile day for Tokyo stocks which were down by as much as 2 percent at one point of trade. But the Nikkei 225 Average closed 1.3 percent higher for the first time in four sessions, pulling out of a slide to 16-month lows earlier in the day, buoyed by a $1.8 billion bid led by a U.S. buyout firm to buy nearly one-third of midsize lender Shinsei Bank. Aozora Bank also jumped after unveiling plans for a business alliance with much larger lender Sumitomo Trust & Banking -- as talk of banking industry consolidation turned around a market that had been hit by another rough day on Wall Street.
South Korea's KOSPI shed 1.1 percent to a fresh two-month closing low as Kookmin Bank and other lenders were hit by that Citigroup downgrade which bolstered worries about a credit crunch. But steelmakers such as POSCO rose, helping the main index cut losses, after China's Baoshan Iron and Steel said it was raising major steel product prices.
Australian shares closed down 1.7 percent to an eight-week low as financial firms such as Macquarie Group and major banks slipped on fresh credit worries, while steep falls in base metals prices dented miners such as BHP Billiton.
Singapore's Straits Times Index closed up 0.8 percent after dropping as much as 2 percent in the morning. But shares of Singapore Telecommunications slid 2.7 percent after an Indonesian watchdog ruled that the Singapore company's stake in mobile phone firm Telkomsel violates anti-monopoly laws.
Hong Kong's Hang Seng index finished 1.1 percent in the green despite fears of further fallout from the credit crisis and steps by Beijing to restrain mainland fund flows into the city's equity market. China Mobile closed 2 percent higher after falling as much as 2.8 percent, as investors reacted to strong subscriber additions posted by the world's top wireless carrier.
China's Shanghai Composite Index swung into positive territory before the close, after spending the morning in the red.