With a public holiday closing Hong Kong Friday and an unwinding yen carry trade, nothing could bring Asia's markets to settle into the green for the end of the week.

After spiking into positive territory midday, the Shanghai Composite Index fell back 7.24 points, or 0.1%, to 5.818.05, continuing the last two days' run of losses.

Shares in China Life Insurance ( LFC) lost 0.5%, to 67.67 yuan in Chinese trading, while even Aluminum Corp of China ( ACH), which hit a record high this week on strengthening commodity prices, slumped 1.1%, to 50.17 yuan.

"An apt metaphor to describe the current condition of the equity markets is perhaps someone lighting some dry wood with a match, then pouring on gasoline to make sure the fire keeps burning," writes Sean Darby in a report issued to Nomura's Asian clients earlier today.

Most expect Chinese trading next week to follow a similar trend. Yesterday, strong trading in Chinese "H" shares, listed in Hong Kong, kept Asia's markets afloat as it was rumored that Beijing was considering introducing swaps, which allow mainland investors to buy the Hong Kong-listed companies. The announcement was met with skepticism by many Hong Kong investors.

Today, the regulator denied considering such moves and said such speculation was a "misunderstanding." That will be bad news for the Hang Seng, and may be troublesome for U.S. exchange-traded funds invested there, like the iShares Hong Kong ( EWH).

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