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After a volatile sell-off this week in Asia, markets ended mixed Friday, with Chinese indices in flat territory after dropping at the end of the day as multiple lending rate cuts in Hong Kong could not sustain investor sentiment.


Hang Seng

closed up 23 points, or 0.8%, to 28,783, while the

Shanghai Composite Index

lost 15 points, or 0.27%, to 5315.

In Japan, the


suffered the region's worst declines, closing down 188 points, or 1.2%, to 15,583, rapidly nearing a 52-week low of 15,262. The


fared similarly, down 22 points, or 1.5%, to 1494. The


rose 10 points, or 0.55%, to 1990.

"After a whole week's decline for this week I still see the index becoming very volatile since market sentiment is turning back and most of the investors are cautious about sub prime," says Castor Pang, a market strategist for Sun Hung Kai in Hong Kong. "Hong Kong banks allowed an interest rate cut but that couldn't help the whole day -- only 23 points up was smaller than expectations," adds Pang.

In morning trading,


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Hang Seng Bank

, and

Bank of China

each announced they would cut their prime lending rates by 25 basis points, to 7%.

Bank of East Asia


Standard Chartered Bank

announced after hours that they would cut their prime lending rates by 25 basis points too, to 7.25%. All reductions will take effect on Monday.

Hong Kong's momentum stocks lost their luster in late trading as uncertainty for the coming week began to creep in during afternoon trading.

China Mobile

(CHL) - Get China Mobile Ltd. Report

fell 0.65%, to HK$137, while


(PTR) - Get PetroChina Company Limited Report

managed to sustain a 0.87% gain, to end at HK$16.14.

China Life Insurance

(LFC) - Get China Life Insurance Company Limited American Depositary Shares Report

dipped 1.88%, to HK$44.40, while in other financials,

HSBC Holdings


fell 0.98%, to HK$141 on news of the lending rate cut.

In China,

People's Bank of China's

deputy governor Wu Xiaoling was publicly dismissive of the recent rise in the yuan, which ended today at 7.4113 vs. dollar, and which some say is headed towards 7. A strengthening yuan is generally seen as a negative for Chinese exporters.

"I hope foreign private equity funds would make more use of the yuan market," Wu told local journalists. "What the country needs is not money, but expertise in investment and management of private equity funds."

In Japan, financials there were even harder hit, with

Mizuho Financial

(MFG) - Get Mizuho Financial Group Inc. Sponosred ADR (Japan) Report

plunging 5.7%, to 531,000 yen, while

Mitsubishi UFJ


dived 4.8%, to 920 yen.

Exporters were also sold, with


(SNE) - Get Sony Corp. Report

down 0.74%, to 5,350 yen,


(CAJ) - Get Canon Inc. American Depositary Shares Report

off 1.41%, to 5,580 yen,



sinking 4%, to 168,000 yen and


(NTDOY) - Get Nintendo Co. Ltd ADR Report

sliding 3.76%, to 61,400 yen.

The yen continued to strengthen in Asian trading, to 112.5 vs. the dollar, from 112.59 yesterday.

Investors in Hong Kong are notably less confident about the slide in Asian shares right now, compared with a month ago when many were unsurprised by a similar round of selling.

Part of the big disappointment for many is Beijing's lack in readiness to start letting Chinese retail investors buy shares in Hong Kong, making the price disparity between dual-listed companies only an arbitrage opportunity in principle right now.

"I think many still think it will happen, but not at the end of this year as expected. Most think next year now," says Winner Lee, a quantitative strategist for BNP Paribas in Hong Kong.

Lee adds that hedge funds are seeing this period as a "time to play the downside." She sees China-related shares, like China Mobile and

Aluminum Corp of China

(ACH) - Get Aluminum Corporation of China Limited American Depositary Shares Report

, as the weakest bet, with Hong Kong property stocks as the strongest.

"A lot of my friends are already trying to find properties to invest in -- they prefer to buy property instead of stocks right now." Part of the reason is a potential further reduction in rates both in the U.S. and Hong Kong, coupled with a creeping level of uncertainty in the capital markets.

Sun Hung Kai's Pang concurs, although he advises exercising caution "because it is still too early to say whether the U.S. is persisting in interest rate cuts."

Pang expects the Hang Seng to trend between 28,000 and 30,000 next week, just shy of the 31,000 point target set by Standard & Poors for the index in 2008.

He adds that Chinese insurers may also be a good bet for bargain hunters, although he is bearish on the rest of the big Chinese shares, and in particular


, which he says has been overbought.

"In the insurance sector in China, which seems to have had a large correction already, prices and valuations seem to be close to fair value, so

China Life


Ping An

will be the first movers."

Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at

. He lives in New York.