Signs of government support lifted Chinese shares, while other stock markets in Asia slid and haven assets rallied after North Korea said it successfully staged its first test of a more powerful form of nuclear weapon.
Japan’s Nikkei 225 lost 182.68 points, or 1%, to 18,191.32.
The Hang Seng index in Hong Kong surrendered 207.91 points, or 1%, to 20,980.81
Reports emerged of a 5.1 magnitude earthquake in North Korea near a nuclear testing site. North Korea's state-owned television station later said that the country conducted a successful hydrogen nuclear test and said that it won't give up nuclear capability unless the U.S. drops its hostile foreign policy towards the country.
The Japanese yen, considered a safe-harbor in times of tumult, rose with the U.S. dollar fetching 118.59 yen, compared with around 119.15 yen before the news on North Korea. The Korean won fell against the U.S. dollar, with the pair trading at 1,196.73, compared with around 1,192.20 before the news.
After news of North Korea's purported nuclear test broke, shares of South Korean defense stocks surged, but later pared back some of their rapid gains. Shares of Firstec closed 2.9% higher after surging as much as 20.8% intraday. Speco shares finished up 16.5% and Victek was up 25.8%
Elsewhere, Samsung Electronics shares closed 2.7% lower ahead of its fourth-quarter earnings guidance expected later in the week.
In Japan, shares of Toyota finished down 2%. The carmaker announced Tuesday afternoon it aimed to sell 1.15 million vehicles in China this year with its joint venture partners, up 2.7% from 2015. According to reports, Toyota's sales in China fell 2.4% in December from a year earlier to about 122,000 vehicles.
Other exporters also traded lower, with Sony down 2.2% and Panasonic off 1.5%. A stronger yen can pressure exporters' earnings when they are translated back into the Japanese currency.
In Hong Kong, shares in one of China's largest real estate developers, China Vanke, resumed trade, with the stock finishing down 9.2%.
The company has been fighting a suspected hostile takeover bid by one of its largest shareholders. The shares had been suspended from trade since December 18 and the company's Shenzhen-listed shares still remain on a halt.
Shares of New World China, on the other hand, shot up 20.6% after Hong Kong-based real estate developer New World Development made another attempt to take the company private.
In Australia, banking stocks were firmly down, with National Australia Bank being the weakest among the so-called big four lenders, finishing down 1.4% Resource plays were pressured, with Rio Tinto shares ending down 2.9% and iron ore producer Fortescue declining 6.1% Gold miner Newcrest erased early gains on the back of higher gold prices to close down 2%.
CHINA
The CSI 300 Index gained 61.03 points, or 1.8%, to 3,539.81
Traders and analysts suspect China’s state-owned funds tasked with supporting the market likely bought shares on Tuesday, sending the signal that they were ready to step in should losses deepen. The stock regulator also signaled Tuesday that it would regulate selling among big shareholders, which had been banned from unloading shares since the summer stock rout. Both prospects encouraged buyers to buy in on Wednesday.
Concerns about China weighed on shares around the region. China's services sector saw a modest expansion in December, though the pace was the slowest in 17 months, according to the Caixin non-manufacturing Purchasing Managers' Index (PMI), released Wednesday.
The reading came in at 50.2 in December from 51.2 in November. Last week, the official services PMI reading for December was up at 54.4, from November's 53.6. A reading above 50 indicates an expansion in activity on a monthly basis.
In other markets
In Singapore, the Straits Times Index slid 29.96 points, or 1.1%, to 2,804.27
The Kospi in Korea fell 5.1 points, or 0.3%, to 1,925.43
Taiwan’s Taiex index slumped 84.72 points, or 1.1%, to 7,990.39
In New Zealand, the NZX 50 dipped 15.58 points, or 0.3%, to 6,262.52
The ASX 200 jettisoned 61.3 points, or 1.2%, to 5,123.13
