South Korean stocks and the won led most Asian markets lower on Friday after the North conducted another nuclear test, while trading was also hit by worries over global central bank policy easing. Pyongyang said it had conducted a "successful" fifth nuclear test, which South Korea said was its largest-ever.
The news intensified worries about geopolitical tensions in the region as world powers including China struggle to rein in Pyongyang's erratic behaviour. Seoul's KOSPI was down 1.5 per cent in the afternoon while a Bank of Korea decision not to cut interest rates was unable to prevent the won sinking 0.8 per cent.
The losses led a sell-off around most of the region with Sydney and Singapore each down 0.9 per cent, while there were also sharp falls in Taipei, Jakarta and Manila. However, Japan's Nikkei recovered from early losses to sit 0.1 per cent higher. Adding to downward pressure were worries about central bank inaction in dealing with a slowdown in the global economy.
On Friday, the European Central Bank opted against fresh stimulus, with its president Mario Draghi calling for "patience" to see the effect of vast amounts of cash already injected into the system. While he had not been expected to announce any action, there was disappointment Draghi did not provide any forward guidance, while some analysts said the bank was possibly planning new measures as its bond-buying programme reaches runs out of assets to buy.
Tokyo-based dealers are also concerned at the lack of movement from Japan's central bank ahead of a policy meeting later this month, despite another weak growth reading on Thursday and a general malaise across the economy. "The ECB, and many central banks now, look to be taking more of a measured approach to additional policy easing compared with the not-too-distant past," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand, said in a client note.
"This is only natural, of course, as monetary policy delves further into the unknown." Hong Kong stocks soared one per cent as traders welcomed news that mainland Chinese authorities would allow the country's insurers to invest in the city's stock market. The gains extended the previous day's advance fuelled by news of the first rise in Chinese imports for 22 months. Shanghai was flat despite figures showing the producer price index - a measure of the cost of goods at the factory gate - fell at its slowest pace in more than four years.