Asian stocks dropped on Thursday after stronger-than-expected economic growth in China raised the probability of tighter monetary policy in the country.
China's Shanghai Composite Index tumbled, dragging down Hong Kong's Hang Seng Index.
Heavyweight HSBC slipped 2.1 percent, the biggest drag on the Hang Seng, as investors took money off the table. Heavy buying since the start of the year had taken the stock's relative strength index to above 76. A RSI above 70 indicates a security is overbought. Financials led losses with the sub-sector index down 2.9 percent to its lowest since September last year.
The final set of 2010 economic data, released on Thursday, showed China's growth soaring past expectations while inflation slowed just a touch.
While the indicators did not change the long-term prospects of China' monetary policy, analysts said they raised the possibility of a rate hike as early as before the Lunar New Year in early February.
In Shanghai, Industrial and Commercial Bank of China, the world's largest lender by market capitalization, was the biggest drag on the main index on Thursday with a loss of 1.9 percent.
Towards the close, China's bank regulators said banks must bring all of their off-balance-sheet trust loans back onto their books this year, reflecting Beijing's determination to get lenders to fall in line with the policy of slowing credit growth to fight inflation.
The benchmark Nikkei ended down 1.1 percent or 119.79 points at 10,437.31. The broader Topix shed 1 percent to 927.19.
Banking shares fell in heavy trade following disappointing results from Goldman Sachs. Mitsubishi UFJ Financial Group, Japan's biggest bank by assets, lost 1.1 percent to 455 yen, while Sumitomo Mitsui Financial Group slipped 1.6 percent to 3,005 yen.
Exporter stocks were under some pressure as the yen spacer gained slightly against the dollar. Canon dropped 2.3 percent to 4,100 yen and Nissan Motor slipped 1.7 percent to 835 yen.
Seoul Stocks Slip, Banks Weigh
Seoul shares slipped, with tech shares such as Samsung Electronics taking a breather after strong gains.
Shares in Samsung Electronics dipped 1.3 percent after posting a record closing high on Wednesday.
A fall in banking issues also weighed on the market. KB Financial Group, holding company of South Korea's No.1 commercial lender Kookmin Bank, ended 1.3 percent down. Shinhan Financial Group lost 1.9 percent.
But, OCI outperformed, rising 1 percent on strong earnings and after the polysilicon maker said it bought a majority stake in U.S. solar energy developer CornerStone Power Development.
The Korea Composite Stock Price Index (KOSPI) ended down 0.43
percent at 2,106.66 points.
ASX Declines 1.1%
Australian shares fell as investor sentiment sagged on sour U.S. housing data and fresh worries about China reining in growth.
The benchmark S&P/ASX 200 index ended 1.1 percent lower, erasing most of Wednesday's gain.
Top miners BHP Billiton and Rio Tinto fell around 2 percent, while smaller miners fell even harder. Closely watched data from China, the major miners' customer, reinforced fears about the country needing to tame growth, which would cut metals demand.
The country's number three iron ore miner Fortescue Metals Group slid 7.8 percent after Reuters reported Temasek Holdings selling its entire 4 percent stake in the firm at a 4.3 to 6 percent discount to raise up to $877 million.
Virgin Blue , Australia's no.2 airline, took off in late trading, ending up 10 percent at A$0.44, spurred by Air New Zealand snapping up shares.
Singapore's STI fell 1.1 percent. Shares of palm oil firm First Resources were among the biggest losers, tumbling 9.9 percent after its main shareholder, Eight Capital, sold 75 million shares of the company at S$1.48 each, raising S$111 million ($86.5 million).
The FTSE CNBC Asia 100 index fell 1.4 percent.