Asia's markets were mixed Thursday, as Hong Kong and China rebounded from recent weakness, but a stronger yen weighed on exporters in Japan, dragging down the Nikkei.

The Shanghai Composite Index rose 57.84 points, or 1.7%, to 3471.74, after plunging 5.5% Wednesday, while Hong Kong's Hang Seng rebounded 202.53 points, or 0.8%, to 24,187. Hong Kong shares have experienced much smaller declines in general than their mainland-listed neighbors. In Japan, the Nikkei fell 166 points, or 1.3%, to 12,945.30.

"Despite the 45% fall from its peak, we believe upside for the domestic A-share market is capped by more potential earnings disappointments, in particular from the loss of investment returns, massive funding needs ... and continued sell-down pressure from previously locked-up shares," writes Lan Xue, China strategist for Citigroup in Hong Kong, in a research note.

China Watch: Turn Chaos Into Cash

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Even with the Hang Seng's rebound, traders in Hong Kong noted heavy selling beginning to take shape in the local market. In particular, foreign long-only hedge funds were using the day's spikes to unload positions in

China Life Insurance

(LFC) - Get Report

,

Ping An

(PIAIF)

and

Hang Lung Properties

(HLPPY)

, they said.

"The

Hang Seng Index seems to have stalled here with the resistance set at 25,000, and support at 23,300. Shorts are starting to creep up again.

Cathay Pacific

(CPCAY)

is a popular one," says Martin Marnick, a director at Helmsman Global Trading in Hong Kong.

China Life Insurance gained 1.9% to HK$29.55, and Ping An climbed 2.6% to HK$64.05. Hang Lung Properties eased 0.7%, to HK$29.50.

Commodity prices in Asia remained steady. Oil was selling for $110.98 a barrel, while gold was at $938.40 an ounce, in Singapore during the late afternoon.

Shares in

PetroChina

(PTR) - Get Report

dropped 1.8% to HK$10.08, and

Aluminum Corp. of China

(ACH) - Get Report

gained 0.8% to HK$13.06.

Sinopec Shanghai Petrochemical

(SHI) - Get Report

rose 0.5% to HK$8.71, after falling more than 6% in the previous session.

In Hong Kong, gold miner

Zijin Mining

(ZIJMF)

slipped 1.3% to HK$7.90, as short sellers hammered the stock on the open. Zijin has risen recently on speculation that it will raise up to $1.5 billion in a Shanghai A-share listing.

Airlines weakened on the renewed strength in commodities. Cathay Pacific fell 2.3% to HK$15.36, and

Air China

(AIRYY)

dipped 1.1% to HK$6.07.

In Japan, the yen rose to 101.03 vs. the dollar, from 101.85 previously.

Canon

(CAJ) - Get Report

lost 1.1% to 4720 yen, and

Honda

(HMC) - Get Report

fell 0.5% to 2850 yen.

Nintendo

(NTDOY)

bucked the trend, rising 1.8% to 55,400 yen, as the company launched Super Mario Kart for its Wii console in Japan. Nintendo was also rumored to be mulling a price cut for the console to coincide with the game's launch in the U.S. and in Europe.

In other news,

Takeda Pharmaceutical

(TKPHF)

, Japan's largest drugmaker, said it was buying

Millennium Pharmaceuticals

( MLNM) for $8.8 billion, or $25 a share. The deal represents a 53% mark-up over Wednesday's closing price. Analysts said that Takeda wants to acquire blood-cancer medication Velcade before the patent expires on its diabetes pill.

Other Asian markets were also mixed. The Taiwanese Taiex gained 1.9% to 8829.40, while South Korea's Kospi rose 0.6% to 1764.64. In India, the Bombay Sensitive Index fell 0.6% to 15,695.10.

Be sure to check out the Far East Portfolio at Stockpickr.com to find out which Indian and Chinese companies are making big moves and announcing major news.

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

www.theglobalperspective.biz

. He lives in New York.