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Most Asian markets fell Monday as investors turned cautious ahead of a key summit of European leaders later in the day and as Chinese stocks were hit by disappointment over a lack of policy easing from Beijing.
The drop on mainland Chinese bourses applied pressure on Hong Kong, where shares fell for the first time in seven trading days. Taiwan's market, open after a long Lunar New Year holiday, bucked the trend with a sharp rise.
The Hang Seng Index tumbled 1.7% to 20160.41 in Hong Kong, while in mainland China, where investors were returning after a week-long holiday, the Shanghai Composite Index lost 1.5% to 2285.04.
"People were expecting easing in China during the Chinese New Year, and that didn't happen...Some of the speculators who did buy shares had to stop losses," said Peter Lai, director at DBS Vickers, adding monetary easing now appeared more likely after key Chinese economic releases next week.
"Many of our clients are taking profits—they did buy some shares [at the beginning of the month], and the market did well," Mr. Lai said.
Elsewhere, Japan's Nikkei Stock Average finished 0.5% lower at 8793.05, South Korea's Kospi fell 1.2% to 1940.55 and Australia's S&P/ASX 200 dropped 0.4% to 4272.7.
Taiwan's Taiex was a notable gainer in the region, climbing 2.4% to 7407.41 as trading resumed for the first time since Jan. 18.
The broad losses came ahead of a summit of European leaders in Brussels Monday, as questions surrounded Greek finances. German Finance Minister Wolfgang Schäuble issued an unusually blunt warning that the euro zone might refuse to grant Greece a fresh bailout.
Shares of developers and mainland banks fell sharply in Hong Kong and Shanghai amid fears over the outlook for the property sector in the absence of policy easing by Beijing.
Industrial & Commercial Bank of China dropped 3%, Agricultural Bank of China gave up 3.6% and China Overseas Land & Investment fell 3.1%. In Shanghai, ICBC fell 2.1% and AgBank lost 1.5% while Poly Real Estate Group slid 4.7%.
Several resource stocks also fell sharply in Hong Kong, with Aluminum Corp. of China or Chalco down 3.4% and Jiangxi Copper 4% lower.
Friday's trading in the U.S. and Europe—a 0.6% loss for the Dow industrials following a weak fourth-quarter U.S. GDP report and a 1% drop for the European Stoxx 600—hit Japanese stocks. Exporters faced additional head winds as the dollar traded below the 77-yen level. Among exporters, Toyota Motor dropped 1.7% and Mazda Motor fell 3.1%, while Fujitsu fell 3.4%.
Chip maker Elpida Memory lost 0.9%; a report late last week in the Nikkei business daily said the company would post an operating loss of ¥90 billion ($1.17 billion) when it reports later in the week.
Fighting the tide of losses for the Japanese techs, however, Advantest soared 12% after increasing its dividend for the year.
In Taipei, technology shares jumped as investors got the first opportunity to react to the strong results from Apple reported during the holiday break. Nanya Technology rose 6.6%, Advanced Semiconductor Engineering rose 7% and AU Optronics climbed 6.4%.
In Sydney, European concerns and a cyclone off the shore of Western Australia were among factors weighing on insurers, with AMP falling 1.8% and QBE Insurance Group lower by 3.1%.
Write to Shri Navaratnam at shri.navaratnam@dowjones.com
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