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Asian stocks dismal after China lowers growth target to 7%

Asian stock markets traded mostly lower on Thursday, following a weak lead from Wall Street, and as China set its gross domestic product (GDP) growth target at 7 percent for 2015.

This will be the mainland's lowest growth target in 11 years, according to a speech by premier Li Keqiang at the annual National People's Congress (NPC), down from 7.5 percent last year - a sign of the government's increased focus on quality over quantity as it seeks to overhaul the country's growth model.

"I think the government doesn't want to come out and say that they are expecting 6 percent growth so they say about 7 percent, but they are clearly playing catch-up," Fraser Howie, managing director at Newedge Singapore, told CNBC's "Street Signs Asia." "You will see more stimulus measures of various forms, which can be quite positive for the markets as you see more liquidity in the markets."

Overnight, U.S. stocks closed lower amid a series of economic data that continued to show moderate growth ahead of Friday's nonfarm payrolls report. The Dow Jones Industrial Average closed down 0.6 percent, while the S&P 500 finished 0.4 percent lower. The tech-heavy Nasdaq Composite shed 0.3 percent.

Asia-Pacific Market Indexes Chart

Mainland indices down

China's Shanghai Composite index dropped 0.9 percent to hit a one-week low as blue-chip stocks such as the property developers and financials fell out of favor with investors.

Bank of Communications and Bank of China led losses within the banking sector, down over 2 percent each, while Poly Real Estate and China Vanke retreated 2.9 and 2.6 percent each.

Environment-related plays which outperformed earlier in the day as the NPC seeks to clampdown on China's pollution woes, reversed direction in the afternoon session; Chongqing Water Group advanced 0.3 percent, while Heilongjiang Interchina Water Treatment and Beijing Capital Group closed down 0.6 and 1.2 percent each.

In Hong Kong, the Hang Seng index sagged 1.2 percent to a three-week low. Focus was on Standard Chartered, which announced a 37 percent slump in 2014's net profit. Shares in Hong Kong rallied 4.3 percent following a surge in its London-listed stock on Wednesday.

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Can China achieve its 2015 growth target?

Nikkei up 0.3%

Japan's Nikkei 225 index recouped losses as the dollar-yen inched up to 119.8. As a result, blue-chip exporters turned broadly higher; Mitsubishi Electric, Canon and Sony gained between 0.5 to 1.6 percent, while Toyota Motor and Toshiba held on to modest losses of 0.6 and 0.4 percent.

Healthcare stocks were the flavor of the day; Ono Pharmaceutical jumped 7.7 percent after U.S. regulators approved its cancer treatment drug Opdivo, while other drugmakers such as Takeda Pharmaceutical soared 2 percent.

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ASX flat

Australia's S&P ASX 200 index rebounded from an one-week intra-day low to close up modestly, but downward pressure on banking stocks capped advances. Commonwealth Bank of Australia, Australia & New Zealand Banking and Westpac lost between 0.1 to 0.2 percent, while National Australia Bank settled slightly above the flatline.

Meanwhile, retail sales in January rose 0.4 percent month-on-month, matching market consensus, while the month's trade balance registered at a deficit of A$980 million, slightly below expectations. Both data points "fed into the general belief that Australia is growing at below-trend," wrote IG's market strategist Evan Lucas.

Retailers rebounded in the afternoon session, with JB Hi-Fi and Myer rising 1.7 and 4 percent each.

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Kospi flat

South Korea's Kospi index finished flat as traders digested the latest news coming out of China, which is South Korea's biggest export market. Among top gainers, Hyundai Motor elevated 2.5 percent.

LG Electronics, which was in the news after the head of its handset division said Wednesday that the firm is designing and developing its own mobile processor chips to be used in its next generation mobile phones, slipped 0.5 percent.

In other news, U.S. ambassador to South Korea, Mark Lippert, was attacked by an armed assailant screaming that the rival Koreas should be unified, South Korean police and media said Thursday. According to Korea Times, TV images showed Lippert bleeding from his head and wrist and was taken to a hospital for treatment.

— CNBC's Evelyn Cheng, John Phillips contributed to this market report.