Asia report: Hong Kong catches up on holiday losses

Hong Kong stocks returned from their Chinese New Year holiday on Thursday, and fell sharply as it caught up with the selloffs that had marked the week so far in Asia.

The Hang Seng Index finished down 3.85% at 18.545.80, coming within spitting distance of its lowest level since June 2012.

As the markets on the mainland remained closed, the Hang Seng China Enterprises Index - a measure of Chinese companies doing business in Hong Kong - plummeted 4.9% to 7,657.91, the lowest close in seven years.

Financial stocks led the losses in the special administrative region, dropping 4.6%. HSBC Holdings closed down 5.44% on local markets. The banking sector as a whole was down more than 20% in Hong Kong so far this year, and 35% in Japan, being one of the worst performers in the region.

Japanese markets were closed for a national holiday, giving the embattled Nikkei Stock Average a breather. It had already shed 6.6% this week.

Elsewhere in the region, South Korea's Kospi was down 2.93% while Australia's S&P/ASX 200 rose 0.95%, with the banking sector - which had taken a beating earlier in the week - leading a recovery from the index's lowest level since July 2013.

"The 5% drop across two trading sessions locally saw bargain hunters trickle back in and pick through some bottom-out stocks," said Vital Addition head of sales Betty Lam.

Sydney had entered a bear market on Wednesday, having fell 20% from its recent peak.

New Zealand's S&P/NZX 50 fell 0.5%, led by multinational casino operator SkyCity Entertainment, which was down 1.6%. It was the first company to post results in Wellington's earnings season.

Oil was down further after Asian trading, with Brent crude losing 1.45% to $30.40 a barrel. West Texas Intermediate was last down 3.04% to a remarkably low $26.64 per barrel.

Asian investors were also responding to Janet Yellen's speech overnight. The US Federal Reserve chairwoman outlined risks in the economic outlook, which could delay her plans for raising interest rates.

The low-rate climate in the US had fanned the flames in equities markets for a number of years now.

"It's not all rosy in Yellen's eyes. Market volatility is a major consideration," said IG market strategist Bernard Aw.

Currencies in the region were mixed, with the safe haven yen still edging closer to the US dollar. It was last up 1.7% against the greenback at JPY 111.42.

Down under, the Aussie dollar edged away from its US counterpart by 0.86% to AUD 1.4214, while the Kiwi lost 0.66% to sit at NZD 1.5057 per USD.

The Indonesian rupiah was a surprise mover on Thursday, rising 0.5% against the US dollar to touch IDR 13,325 per dollar - its strongest level since last October.