By V. Phani Kumar, MarketWatch HONG KONG (MarketWatch) -- Asian markets ended mixed Monday in a session marked by thin trading volumes, with Japanese stocks erasing early declines to bounce back as investors shrugged off news that the country has slid into a recession. Shanghai-listed shares extended gains into a fourth straight session on expectations the government will unveil more measures to boost consumption, with airlines such as Air China rising sharply on reports they may receive government aid. But the rest of the region mostly declined on steep pre-weekend losses on Wall Street and disappointment that leaders of the G20 group of nations didn't announce any strong economic stimulus measures. "We have to recognize that some investors have recovered their confidence on the back of the Chinese market [gains recently]. But still there is lot of volatility and some believe fundamentals are going to deteriorate further. That's why investors in Asia are quite unwilling to enter the market," said Steven Leung, director at UOB Kay Hian. The Nikkei 225 Average dropped as much as 2.9% during the session, only to bounce back to end 0.7% higher at 8,522.58. The broader Topix index rose 0.4% to 850.49. The rebound came in spite of data released by Japan's Cabinet Office earlier in the day, which showed the country's third-quarter gross domestic product shrank 0.1% over the previous three months, or at an annualized rate of 0.4%. The data also showed Japan's GDP contracted a revised 0.9% during the April-June period from the previous quarter, confirming the country had entered a recession. Matt Robinson, an economist at Moody's Economy.com noted in a report the data showed "the sun has set on Japan's longest post-World War II period of expansion." He added that Japan could expect more fiscal stimulus in coming months, but "now more than ever, the fate of the Japanese economy lies with the rest of the world." Hong Kong shares moved on either side of break-even a few times before ending lower, with the benchmark Hang Seng Index slipping 0.1% to 13,529.53 and the Hang Seng China Enterprises Index losing 0.8% to 6,968.09. Shanghai up; Sydney, Mumbai down On mainland China, the Shanghai Composite index advanced 2.2% to 2,030.48. "I think there is more room for the Chinese government to launch more measures. Not only an interest rate cut, but maybe more policies like a cut in the tax rates to stimulate consumption," said UOB's Leung. Shares of Chinese airlines soared on a Reuters report the state-owned parent company of Air China was seeking a cash injection from the government. In Hong Kong trading, Air China shares jumped 5.5%, China Eastern Airlines Corp. soared 9.8% and China Southern Airlines Co. climbed 10.1%. In Shanghai, Air China and China Southern surged 9.9%, while China Eastern gained 10%. Elsewhere, India's Sensitive Index, or Sensex, lost 3.1% to 9,093.77 in afternoon trading, as investors sold off banking shares amid concerns of rising bad loans amid weakening economic growth. ICICI Bank stock tumbled 7.8% and HDFC Bank sank 6.8%, while State Bank of India gave up 2.4%. Australia's S&P/ASX 200 dropped to its lowest level since September 2004, before paring some losses to end down 2.5% at 3,653. South Korea's Kospi struggled to stay in positive territory, before ending 0.9% lower at 1,078.32. New Zealand's NZX 50 index shed 0.9% to 2,741.92 and Taiwan's Taiex ended 0.3% lower at 4,439.80, while Singapore's Straits Times index lost 0.4% to 1,751.65 by late afternoon.

Source