Asian stocks closed mostly lower on Friday, with investors opting to take some profits ahead of key US employment data for last month rather than push stocks further after recent sustained gains, dealers said.
They said that at current levels, such profit-taking was only to be expected as the markets enter the mid-summer doldrums. The series of strong US economic data over the past few weeks has boosted confidence greatly, pointing to further gains next month when business picks up again.
While oil prices continued to test record highs, there is no sign of this feeding through into radically higher inflation while the prospect of more US interest rate increases holds no fears, since most just see them as returning to a neutral setting of around 4 percent over the balance of the year.
On the day, losses were broad-based, with the exception of the Chinese markets, which continued to get a boost from last month's yuan revaluation.
Seoul, down 1.98 percent, was the worst performer as investors decided to take some money off the table after the market had advanced to near 11-year highs.
Tokyo lost 0.98 percent, with sentiment hit by concerns that Japanese Prime Minister Junichiro Koizumi will call snap elections if his signature reform of the post office is voted down by the upper house of parliament.
Sydney was flat, just off record levels as investors marked time ahead of the US jobs data and next week's US Federal Reserve meeting on interest rates.
Mumbai, which has defied gravity and the weather to post an eight-day record-breaking run, finally succumbed to profit-taking, falling 0.55 percent.
Markets in Taipei were closed due to Typhoon Matsa.
Japanese share prices fell for a second straight day, losing 0.98 percent on concern that the country could be headed for early elections if parliament votes down a proposal to break up the post office, dealers said.
The Tokyo Stock Exchange's benchmark NIKKEI-225 index dropped 116.83 points at 11,766.48. The broader TOPIX index of all first section shares shed 14.98 points or 1.24 percent to 1,189.19.
Declines led gainers by a margin of nearly nine to one on volume of 1.66 billion shares.
"Amid growing political uncertainty and renewed concerns over near-term prospects for the US stock market, no one dares to re-test the psychologically important 12,000-point level on the NIKKEI-225 index," World Nichiei Frontier Securities market analyst Hideyuki Suzuki said.
South Korean share prices closed sharply lower, falling nearly 2 percent in a broad-based correction to recent sharp gains following Wall Street's overnight downturn, dealers said.
They said foreign and retail investors sold off IT and other blue chips, with sentiment hit by rising oil prices and caution ahead of interest rate decisions by the Bank of Korea and the US Federal Reserve in the coming week.
At the same time, an upturn in the won sparked fresh concerns over the outlook for exports, the economy's main driver, although a correction was to have been expected given the market's recent advance to near 11-year highs.
"The market was suddenly in an uproar, with many investors perplexed by the won's rise, the oil price rise and foreign investor selling," CJ Investment Securities analyst Kim Seung-Han said.
The KOSPI index closed down 22.03 points or 1.98 percent at 1,089.36, off a high of 1,101.15 and a low of 1,084.23.
Hong Kong share prices closed 0.40 percent lower on Wall Street's overnight falls and profit-taking in the property sector after recent strong gains, dealers said.
The Hang Seng Index closed down 60.22 points at 15,051.32, off a low of 14,972.52 and high of 15,083.51. The property sub-index fell 106.55 points or 0.55 percent to 19,302.11, with most stocks in the sector losing ground.
Chinese share prices closed broadly higher, adding 2.35 percent on strong follow-through interest with banks in demand due to market talk of a cut in operating taxes and energy stocks buoyed by the high oil prices, dealers said.
They said that after Thursday's modest correction, investors moved squarely to the buy-side, reflecting the continued improvement in confidence since the revaluation of the yuan on July 21.
Since then, the market has put on more than a hundred points or nearly 10 percent, with some now thinking that stocks may have seen the worst after having floundered at 8-year lows for much of the year.
The Shanghai A-share Index rose 27.26 points to 1,186.07, while the Shenzhen A-share Index was up 7.19 points or 2.67 percent at 276.31. The benchmark Shanghai Composite Index, which covers both A- and B-shares, closed up 26.15 points or 2.37 percent at 1,128.74.
The yuan closed at 8.1037 to the US dollar on Friday, down from the previous finish at 8.1027.
Australian share prices closed steady as investors paused ahead of key US employment data due later in the day to provide a clearer direction going forward, dealers said.
The benchmark SP/ASX 200 index closed up 2.5 points at 4,377.3, off an intraday high of 4,381.8 and a low of 4361.4. The broader All Ordinaries index added 4.6 points at 4,333.1.
Singapore share prices closed lower for a third straight session, dropping one percent as investors locked in profits on the market's recent gains, dealers said. The Singapore Straits Times index lost 23.52 points at 2,338.87.
Malaysian share prices closed 0.19 percent lower with sentiment weighed down by the overnight fall on Wall Street and higher oil prices, dealers said. The Kuala Lumpur Composite Index was down 1.82 points to 943.41, off a low of 941.85 and a high of 946.22.
Thai share prices closed 0.21 percent higher as the market consolidated after a very mixed week in the absence of a fresh lead, dealers said. The Stock Exchange of Thailand (SET) composite index rose 1.44 points to 686.01 points and the bluechip SET 50 was up 0.79 points at 485.19.
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