HONG KONG (MarketWatch) -- Asian markets ended mixed Tuesday in a volatile session marked by thin trading volumes as investors awaited the U.S. Federal Reserve's decision on interest rates. Japanese shares were dragged down by steelmakers such as Nippon Steel Corp. on a report Toyota Motor Corp. planned to ask its steel suppliers to cut prices sharply. Australian stocks also fell, with Telstra Corp. sliding on a broker downgrade of its target price after the government excluded the telecommunications major from a tender process for a national broadband network. Thailand stocks rose sharply as investors snapped up beaten-down shares on hopes the appointment of Democrat Party's Abhisit Vejjajiva as the country's prime minister will result in a stable government after months of political turmoil. Stocks in Hong Kong wavered in a range on either side of break-even. Jamie Spiteri, head of trading at Shaw Stockbroking in Sydney, said a steep interest-rate cut by the Federal Open Markets Committee may result in an immediate positive reaction in equity markets, "but we are expecting lower rates as a common landscape across most markets to continue." "A lot of market activity is fading away as we get closer to Christmas and the New Year," he said. Ben Kwong, chief operating officer at KGI Asia, said a half-point reduction had been factored into the current market prices and was the most likely outcome, as the Fed "will leave some room for a further cut." Japan's Nikkei 225 Average dropped 1.1% to 8,568.02, while the broader Topix index gave up 2.2% to 828.62. Australia's S&P/ASX 200 index slid 1% to 3,556.20, South Korea's Kospi gained 0.3% to 1,161.56 and New Zealand's NZX 50 rose 0.7% to 2,695.08. In afternoon trading, India's Sensex added 1.5% to 9,983.92 and Singapore's Straits Times Index rose 0.4% to 1,782.09, while Indonesia's JSX Composite fell 1.2% to 1,342.84. China's Shanghai Composite advanced 0.5% to 1,975.01 and Hong Kong's Hang Seng Index edged 0.6% higher to 15,130.21, after straddling the 15,000 point level, while Taiwan's Taiex ended 0.1% higher at 4,616.89. KGI's Kwong said "window-dressing activity," or buying by institutional investors to shore up the value of their portfolios before the end of the year, continued in the market. Thai rally continues In Bangkok, the SET Index rose 2.2% to 446.79 by late afternoon, extending gains from the previous session, as investors cheered the appointment of Democratic Party's Abhisit Vejjajiva as prime minister. "It's a very significant political development. This is the first time in eight years that we don't have a Thaksin [or Thaksin supported] government," said Kenric Singhakowin, vice president at Royal Bank of Scotland in Bangkok. He expects the SET Index, which is down nearly 48% in 2008 to date, to reach 500 by early next year, as retail investors and domestic institutional investors return to the market. Leading the gains in Bangkok, shares of Bank of Ayudhya climbed 6% and Thai Airways International rose 2.8%, while PTT Exploration & Production advanced 0.9%. Regional detail Steelmakers dropped in Tokyo, with Nippon Steel Corp. giving up 4.4% and JFE Holdings Inc. sliding 5.9%.

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