Equities fell Tuesday, with traders unable to build on the previous day's rally as they await fresh measures out of China to stimulate the economy and support the creaking property market.
Investors are also keeping tabs on massively indebted developer Country Garden, which is approaching the end of its grace period on interest payments for dollar-denominated bonds, with failure to pay putting it at risk of default.
A series of announcements out of Beijing recently has helped lighten the mood on trading floors after months of dour data indicating the post-Covid recovery has hit a wall.
Sentiment was also helped by a positive US jobs report on Friday, which was seen as giving the Federal Reserve room to stand pat on monetary policy after more than a year of interest rate hikes.
However, with Wall Street closed Monday for a holiday and providing no catalyst, there was little desire in Asia to continue the buying.
Investors are hoping authorities push ahead with more help for the property industry, having introduced in the past week a number of measures including reducing mortgage down payments and providing tax incentives.
"Although individual regulatory changes may not cause significant market shifts, the combined impact of several rapid adjustments sends strong signals," said Redmond Wong at Saxo.
"This suggests the potential for a sustained rally in both Hong Kong and mainland Chinese equity markets in the near term."
Country Garden, which has liabilities worth around $200 billion, is once again in focus as it struggles to meet its interest payments of more than $20 million.
The firm won approval from creditors last week to extend a deadline for a key repayment, narrowly avoiding a potential default.
There is a worry that a default could be bigger than that at Evergrande in 2021, as it has four times as many projects.
Markets fell across the board Tuesday, with Hong Kong off more than one percent -- though struggling mainland developers including Evergrande and Sunac were well up.
Shanghai was also in negative territory after a report showed China's services sector grew last month but at a much slower pace than expected.
There were steep losses in Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei and Manila.
Still, Shane Oliver at AMP Capital was hopeful about the outlook as the Fed and its peers look to call an end to their rate hikes thanks to a string of data suggesting inflation is going in the right direction.
"Central banks have eased their tightening bias, but they still have a tightening bias," he told Bloomberg Television.
"The volatility will remain high at the very least, but if we do get a pullback, I would see that as a buying opportunity because the inflationary pressures globally are easing and then ultimately will take pressure off central banks."
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: DOWN 0.2 percent at 32,870.00 (break)
Hong Kong - Hang Seng Index: DOWN 1.4 percent at 18,587.23
Shanghai - Composite: DOWN 0.6 percent at 3,158.53
Euro/dollar: DOWN at $1.0787 from $1.0790 on Monday
Pound/dollar: UP at $1.2623 from $1.2621
Dollar/yen: UP at 146.64 yen from 146.45 yen
Euro/pound: DOWN at 85.47 pence from 85.50 pence
West Texas Intermediate: UP 0.3 percent at $85.76 per barrel
Brent North Sea crude: DOWN 0.3 percent at $88.78 per barrel
London - FTSE 100: DOWN 0.2 percent at 7,279.51 (close)
New York - Dow: Closed for a public holiday
dan/cwl
