Most Asian stocks declined on Wednesday, pausing for breath after a recent rally as investors took their cues from a mixed Wall Street session overnight amid a lack of regional developments.
South Korea's tech-heavy bourse tracked weakness in the tech-heavy Nasdaq to lead the decline with a 1% drop, followed by Malaysia, Philippines and Jakarta equities, all down after multiple days of gains.
A light data calendar for Asia this week, with only Chinese manufacturing data due on Friday, will keep markets "at the mercy of headline-driven volatility, a theme that has dominated December," said Jeffrey Halley, senior market analyst, Asia Pacific, OANDA.
Volatility is common in late December as fund managers prepare to close their books for the year and holidays thin trading volumes in some major markets.
Asian currencies also faced pressure from the greenback's firmness on safe-haven flows as risk sentiment pared back slightly.
The Philippine peso and the Indonesian rupiah fell the most, down 0.5% and 0.3%, respectively, while Malaysia's ringgit and the Singapore dollar eased 0.1% each.
The rupiah eyed its worst session in almost two weeks. The currency had gained around a percent over the past fortnight and seemed to be on a technical correction course.
Meanwhile, the peso's losses increased to 1.4% since Dec. 16 when a powerful typhoon barrelled into the Philippines, displacing more than 400,000 people and causing widespread economic damage.
"We expect this year's peso underperformance to sustain until third-quarter of 2022 ... which is a result of the Philippines' lagging the vaccination recovery relative to the rest of Asia," Bank of America analysts wrote in a note.
"Consequently, growth, inflation and the balance of payments may remain challenging into the new year, especially amid rising energy prices."
Shanghai stocks slipped 0.7%, while the Chinese yuan traded flat as the city of Xian, with 13 million people, entered its seventh day of lockdown to combat a COVID-19 outbreak.
Malaysia's benchmark index shed 0.2% after rising 3.2% over the past five sessions. It is the only bourse in the region that is set to end the year in negative territory.
** Top losers on the Kuala Lumpur index are Sime Darby Plantation Bhd and IOI Corp, while Top Glove Corp gains most
** China's Shenzhen Stock Exchange and the Singapore Exchange (SGX) have committed to setting up a cross-border link for exchange-traded funds (ETFs)
** Indonesian 10-year benchmark yields are up 1.2 basis points at 6.366%