Asian markets were mixed Monday, with most indices ending flat in cautious trading ahead of earnings announcements scheduled for the end of the month. Only China jumped, after the country's securities regulator reportedly approved two open-ended equity funds for 2008.

In Hong Kong, the Hang Seng opened higher, but finished with a loss of 389 points, or 1.6%, to 23,759, after investors took profits on commodity-heavy stocks like

Cathay Pacific

(CPCAY)

, which had seen morning gains. In Japan, the Nikkei managed a slightly higher finish, as foreign selling showed signs of coming to an end. The index was up 13 points, or 0.1%, at 13,635. China's Shanghai Composite gained 71 points, or 1.6%, to 4568.

"In the short term, equities are oversold but there appears little to catalyze a rally," says Sean Darby, chief Asia strategist for Nomura Bank in Hong Kong. "We expect volatility to continue to trend upwards in line with deteriorating credit fundamentals."

Flows from trading houses in Hong Kong indicated early buying by foreign funds in Cathay Pacific and rate-sensitive stocks like

Hutchison

(HUWHY)

and

Bank of China

(BACHF)

. These stocks pulled back towards the close, however, as local profit-taking trumped the buying.

Cathay Pacific lost 0.6%, to HK$16.80, while Bank of China fell 2.6%, to HK$3.06, and Hutchison slipped 1%, to HK$74.15.

Most financials were victims of concerns about the continuing subprime crisis, despite better-than-expected results from

Bank of East Asia

(BKEAY)

. Bank of East Asia said net income rose 21%, to HK$4.14 billion ($530.8) vs. HK$3.43 ($440) a year earlier. JP Morgan kept its "neutral" call on Bank of East Asia, with a price target of HK$51.

Bank of East Asia fell 2.9%, to HK$40.45, while rival

HSBC Holdings

(HBC)

, a key weighting in the Hang Seng, dipped 1.9%, to HK$112.60 on expectations that the banks may have to take more writedowns.

Ping An

(PIAIF)

declined 2.6%, to HK$57.40, as traders took note of a front page feature in the

Asian Wall Street Journal

questioning how China's second largest insurer would use the $18.4 billion it hopes to raise through the issue of more Shanghai-listed "A" shares.

Citigroup analyst Bob Leung, who is based in Hong Kong, maintained a "sell" rating on

Hong Kong Exchanges

(HKXCF)

, a proxy for the Hang Seng, in a research report issued Monday. The bank cut its price target for the stock by 31%, to HK$151.20. Shares ended 2.3% lower, at HK$160.90 on the news.

"While the stock appears to be less excessively valued at

a price to earnings ratio of 29 for 2009 earnings, with the recent correction, we worry street analysts have become far too bullish on average daily turnover assumptions," wrote Leung. "There is also risk to the downside with volume contracting along with a market downturn ... so go sell Hong Kong Exchanges now."

Market turnover in Hong Kong was down 6% from Friday, at HK$78.1 billion, or $10 billion.

Telcos were mixed, as investors mulled unconfirmed newsflows and erred on the side of caution.

China Mobile

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may seek a listing for yuan-denominated "A" shares in Shanghai as early as the first quarter of this year, according to local reports. China Mobile fell 2.1%, to HK$118, and

China Netcom

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gave back 2.7%, to HK$25.1.

China Telecom

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and

China Unicom

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gained on mild hopes of benefiting from domestic industry restructuring, The stocks rose 1%, to HK$6.26, and 0.7%, to HK$19.58, respectively.

On the mainland, stocks jumped,

propelled by gains in oil-related shares, which got an uplift from the rising price of crude contracts. Crude oil rose about 35 cents in Asian trading, to $94.95 a barrel by the New York morning.

PetroChina

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rose 0.8%, to 24.05 yuan, while

Sinopec Shanghai Petrochemical

( SHL) inched 0.6% higher, to 13.40 yuan.

China Petroleum & Chemical

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advanced 0.1%, to 18.76 yuan.

Other commodity plays also fared well.

Aluminum Corp of China

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continued a recent string of gains, up 0.4%, to 33 yuan. Despite increasing fuel prices,

Air China

(AIRYY)

rose 0.3%, to 21.81 yuan.

In Japan, while market participants say that the end is near for foreign selling of domestic shares, renewed concerns that insurers may have to take more writedowns weighed on gains in steel-related exports like

Kobe Steel

(KBSTY)

.

Japan's steelmakers agreed to an increase in the price of iron ore, by around 65%, on the assumption there will be continued global demand. Kobe Steel was 0.3% higher, at 337 yen by the end of Japanese trading.

The yen eased slightly, by 0.3%, to 108.06 yen vs. the dollar, but most of the gains were stock-specific rather than related to movements in the domestic currency.

Sony

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gained after it was reported Saturday that

Toshiba

(TOSBF)

may end distribution of its HD DVD high-definition DVD format, in what would be a victory for Sony's competing Blue-ray. Shares in Toshiba jumped 5.7%, to 829 yen, while Sony rose 1%, to 4900 yen.

In other Asian markets, India's Bombay Sensitive Index tracked Hong Kong, falling 0.4%, to 18,084, and South Korea's Kospi rose 0.1%, to 1696. The Taiwanese Taiex rose 0.2%, to 7890.

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.