Asia report: Mixed session amid focus on China's banks and household debt

Asian stocks markets diverged on Wednesday morning, with Japan's Nikkei and several China-focused indices in the red but the Hang Seng and ASX both moving higher as North Korean tensions abated.

The benchmark Shanghai composite index finished down 0.15%, its first loss this week, although the more tech heavy and smaller-cap focused Shenzhen Composite was up 0.59%.

Hang Seng closed up 0.86%, while in Sydney the ASX 200 added 0.48%, while the MSCI Asia Pacific was up 0.05%.

The Hong Kong index was lifted as Tencent made gains ahead of its second-quarter earnings scheduled for release after the close, while Chinese banks were boosted by expectations that the government will pump more liquidity into the banking system.

The People's Bank of China will inject a net 180 billion yuan ($26.9 billion) into the nation's money markets Wednesday, Reuters reported.

Goldman Sachs noted that a recent rotation "away from shadow bank to traditional banking financing in recent months as a part of the government's attempt to control shadow banking related risks and leverage while maintaining growth stability".

Ahead of the Communist Party's five-year planning meeting this autumn, the US bank told clients: "We expect the authorities to fine tune policy stance on a real-time basis to ensure growth stability, at least before the end of the Party Congress."

Earlier, the IMF revised up China’s growth outlook from last year’s report but took a cautious note on rising levels of non-financial sector debt.

The IMF calculating growth between 2017 and 2021 will average 6.4%, up from 6% previously, bumping up its estimate partly because China is seen as continuing its transition to a more sustainable growth path and economic reforms have been wide ranging. The agency also noted that given the solid growth momentum, now is the time to intensify deleveraging and boost domestic consumption.

However, the IMF forecast that household, corporate and government debt will continue to surge, up from 242% of GDP in 2016 to close to 300% by 2022, which raises concerns for a possible sharp decline in growth in the medium term.

Also, data on foreign direct investment in China released by the Ministry of Commerce showed a decline of 1.2% for July, worse than the 0.1% decline in June.

Down Under, Westpac's leading index, which tracks nine gauges of economic activity in Australia, showed a rise of 0.12% in July from a 0.15% fall last time.