Malaysian shares dropped nearly 1% on Thursday ahead of a central bank meeting at which it is expected to hold interest rates, while South Korean shares eyed their worst day in three weeks after policymakers there hinted at further tightening.
Equities in the broader region came under pressure following a weaker overnight session on Wall Street, as cautious sentiment stemmed from worries that the Delta coronavirus variant could blunt the economy's recovery.
A survey conducted by Reuters showed that the Bank Negara Malaysia is likely to leave its key interest rate unchanged at 1.75%, as Malaysia gradually reopens its economy amid a ramped-up COVID-19 vaccination drive.
Shares in Kuala Lumpur dropped 0.8%, their biggest fall since Sept. 1, while the ringgit gained 0.1%.
"With a macroeconomic policy focus on supporting economic recovery and given low and stable core inflation, our house view expects the overnight policy rate (OPR) to stay at the current record low until end-2021," analysts at Maybank said in a note.
The Bank of Korea said in a monetary policy report that raising rates should help slow the pace of household debt growth going forward, and reiterated that it will continue to tighten policy as inflationary pressures persist.
Stocks in Seoul dropped as much as 1.5% and were on course for their worst session since Aug. 19. The won weakened 0.4%.
Most other currencies in the region logged gains, with the Philippine peso, Taiwanese dollar and Thai baht up modestly, even as the U.S dollar firmed.
In the Philippines, government data showed the trade deficit remained above $3 billion for a fourth consecutive month in July, as imports rose faster than exports. Stocks in Manila dropped 0.4.
Separately, China's factory gate inflation hit a 13-year high in August driven by roaring raw materials prices despite Beijing's attempts to cool them, further pressuring manufacturers in the world's second-largest economy.
HIGHLIGHTS
** Indonesian 10-year benchmark yields are up 3.4 basis points at 6.186%
** Top loser on FTSE Bursa Malaysia Kl Index was MISC Bhd, down 4.38%
** Taiwan shares down 0.1%, eye fourth consecutive session of losses