HONG KONG (MarketWatch) -- Asian markets were mixed Friday, with South Korean stocks rebounding on financials after the central bank cut interest rates for the third time in a month, while Hong Kong shares were lifted after HSBC Holdings' local banking unit lowered its lending rate by a quarter-point.
Japanese shares pared their steep early losses, with bargain buying in financials such as Mitsubishi UFJ Financial Group, while exporters declined on a strengthened yen and Toyota Motor Corp. tumbled a day after it slashed its earnings forecast.
Hong Kong's Hang Seng Index dropped as low as 13,975.83, before rebounding to end the morning trading up 1.4% at 13,975.83, while the Hang Seng China Enterprises Index rose 2.3% to 6,753.20.
South Korea's Kospi jumped 2.6% to 1,120.63, also bouncing off the day's lows on the Bank of Korea's quarter-point interest rate cut to 4%.
"People were definitely covering their short positions this morning on speculation of a rate cut," said Dale Tsang, managing director at Imperial Dragon Asset Management Co.
Even so, "although there have been a lot of rate cuts, commercial activities and business activities are quite slow. And a lot of funds are under redemption pressure," he added.
The Nikkei 225 Average, which tumbled 6.5% in the previous session, lost more than 7% in early trading, before recovering. The benchmark was recently down 2.8% at 8,646.97. The broader Topix index lost 3.2% to 880.40.
China's Shanghai Composite inched up 0.1% to 1,719.19 and India's Sensitive Index gained 0.3% to 9,759.58.
Elsewhere, Australia's S&P/ASX 200 gave up 2.6% to 4,042.30, Singapore's Straits Times index advanced 0.1% to 1,820.39, Taiwan's Taiex rose 1% to 4,742.59 and New Zealand's NZX 50 index slid 1.7% to 2,791.65.
Benjamin Collett, head of hedge-fund sales trading at Daiwa Securities SMBC, said the recent bounce in the regional markets was because of covering of short sales and created a "false momentum," drawing investors, but markets were likely to drop further amid a global recession and weakening corporate earnings.
"What we're likely to see now is those same buyers being shaken back out. What it may do is stop longer-term investors from adding to positions," said Collett. "The curve is going to steepen on the downside."
In Hong Kong, shares of HSBC rose 0.8% after its local banking unit cut its lending rates by a quarter-point to 5%, according to reports.
Property shares also bounced, with Cheung Kong (Holdings) rising 1.6% and New World Development Co. gaining 2.7%.
In Tokyo, Toyota shares plunged 11.8%, with more than 25 million shares changing hands by mid-afternoon. The drop came after the automobile giant, at the end of Thursday's trading, reported a 48% decline in half-yearly net income and pared its fiscal-year forecast to 550 billion yen ($5.6 billion) from an earlier view of 1.25 trillion yen, on a weak sales environment in the U.S. and Europe and a strong yen. See full story.
Other exporters tumbled as Toyota's outlook hurt market sentiment, with Honda Motor Co. losing 8.7% and Nissan Motor Co. slumping 7.5%, while Sony Corp. gave up 4.6%.
In Asian currency trading, the U.S. dollar bought 97.37 yen, compared with 98.10 yen late Thursday.
In Seoul trading, shares of KB Financial Group ) jumped 5.1% and Shinhan Financial Group Co. soared 8.2%, erasing early losses after the central bank's rate reduction.
Energy-related stocks dragged in Sydney trading after crude-oil prices extended losses overnight, with BHP Billiton falling 5% and Santos sliding 3.6%.
In Singapore, shares of Singapore Airlines rose 0.5%, recovering in line with the broad market. The shares had declined earlier in the day after the airline Thursday reported a 36% slide in fiscal second-quarter net income on the impact of the global financial crisis on business and leisure travel.
December crude-oil futures declined 27 cents to $60.50 a barrel in electronic trading, after losing $4.53 to $60.77 a barrel on the New York Mercantile Exchange.
On Wall Street, the Dow Jones Industrial Average tumbled for a second day to end 4.9% lower at 8,695.79 amid fears of a deep recession. The S&P 500 index lost 5% to 904.88 and the Nasdaq Composite gave up 4.3% to 1,608.70.
European stocks also ended sharply lower in spite of sharp rate cuts from the Bank of England, the European Central Bank and the Swiss National Bank, with the pan-European Dow Jones Stoxx 600 ending 5.6% lower at 215.48.
