Asia stocks mostly higher as IMF warns of unprecedented crisis; regional geopolitical tensions watched

• Shares in Asia were mostly higher on Wednesday.
• The International Monetary Fund said Tuesday that the global economy is set to see a more significant contraction than it previously forecast.
• Meanwhile, trial results announced Tuesday showed dexamethasone — a widely available drug — can help critically ill coronavirus patients.
• Investors likely also continued to watch for developments on the geopolitical front regionally.

Stocks in Asia were mostly higher on Wednesday as the International Monetary Fund said the global economy is set to see a more significant contraction than it previously forecast.

Mainland Chinese stocks nudged higher on the day, with the Shanghai composite up 0.14% to about 2,935.87 while the Shenzhen component advanced 0.192% to approximately 11,420.84. Hong Kong's Hang Seng index rose 0.25%, as of its final hour of trading.

Over in South Korea, the Kospi rose 0.14% to close at 2,141.05. India's Nifty 50 was 0.24% higher in afternoon trade.

Shares in Japan lagged, as the Nikkei 225 shed 0.56% to close at 22,455.76 while the Topix index declined 0.4% to end its trading day at 1,587.09. 

Meanwhile, the S&P/ASX 200 in Australia added 0.83% to close at 5,991.80.

Overall, the MSCI Asia ex-Japan index was 0.34% higher.

IMF Chief Economist Gita Gopinath said in a Tuesday blog post that "the forthcoming June World Economic Outlook Update is expected to show negative growth rates even worse than previously estimated." The fund also said the current crisis, which it dubbed the Great Lockdown, is "unlike anything the world has seen before."

Authorities have imposed lockdown measures to curb the spread of the coronavirus pandemic, leaving most economies essentially frozen. While many countries have begun to ease these measures, it has proven challenging given the looming threat of a potential resurgence in Covid-19 cases.

Meanwhile, trial results announced Tuesday showed dexamethasone — a widely available drug — can help critically ill coronavirus patients. The treatment reportedly reduced Covid-19 deaths in hospitalized patients by up to one third. Globally, more than 8 million people have been infected by the virus while at least 438,171 lives have been taken, according to data compiled by Johns Hopkins University.

In regional economic data, Japan's exports plunged 28.3% year-on-year in May, according to provisional trade statistics released Wednesday by the country's Ministry of Finance.

"While we expect the impact of Covid-19 on trade to ease gradually, the near-term outlook remains very challenging," Stefan Angrick, senior economist at Oxford Economics, wrote in a note. "Exports are likely to remain under severe pressure as global activity will recover only gradually, although stronger positive momentum in China will provide some support.

Regional geopolitical tensions

Investors likely also continued to watch for developments on the geopolitical front regionally, as tensions escalate along the Korean peninsula after North Korea reportedly destroyed a liaison office with the South. Following that action by the North, South Korea's presidential Blue House said Wednesday that it would no longer accept unreasonable behavior by North Korea, Reuters reported.

Certain Asia-listed defense stocks soared on the back of those developments, with Ishikawa Seisakusho in Japan jumping 14.2% while Victek in South Korea skyrocketed 29.91%. South Korean stocks exposed to North Korea, on the other hand, fell: Hanil Hyundai Cement and Hyundai Elevator tumbled 4.17% and 3.88%, respectively.

The South Korean won also weakened against the greenback, last trading at 1,214.04. Earlier, it had touched a low of 1,218.76 per dollar.

Elsewhere at the Himalayan border, Indian and Chinese troops clashed this week as the two sides remained in conflict, according to a Reuters report. Since early May, hundreds of soldiers have been in a faceoff at three locations, with each side accusing the other of trespassing, the report said.

Oil prices fall

Oil prices fell in the afternoon of Asian trading hours, with international benchmark Brent crude futures down 0.66% to $40.69 per barrel. U.S. crude futures also slipped 1.12% to $37.95 per barrel.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 96.883 after touching levels around 96.5 earlier.

The Japanese yen traded at 107.31 per dollar after seeing levels around 107 earlier in the trading week. The Australian dollar changed hands at $0.6896 after slipping from levels above $0.693 yesterday.

— CNBC's Silvia Amaro and Fred Imbert contributed to this report.