HSI Dips, India-Pakistan Clash Spooks Asia Markets

Hong Kong stocks ended slightly lower on Wednesday, with earlier gains reversed after Pakistan said it had shot down two Indian jets, fuelling fears of an escalating confrontation between the nuclear-armed neighbours.

The Hang Seng Index in Hong Kong dipped 0.1 percent, to 28,757.

On the mainland, the Shanghai Composite Index gained 0.4 percent, to 2,953 while the Shenzhen Composite Index lost 0.6 percent, to 1,540.

Markets fell sharply across the region on the tit-fot-tat shootings but managed to claw back some of the losses. Wednesday's developments came a day after Indian warplanes struck a site in Pakistan that New Delhi said was a militant training camp.

Mumbai was down 0.2 percent while the rupee was down 0.3 percent. The Karachi Stock Exchange sank more than 3 percent.

"This is unprecedented territory, we haven't had tit-for-tat air strikes between India and Pakistan since the 1971 war," Anit Mukherjee, a former Indian Army major and assistant professor at the S Rajaratnam School of International Studies in Singapore, told Bloomberg News.

"We don't know what will come from this. But it seems like Pakistan has given a response. And there have been casualties – captures, deaths."

Tokyo, which closed before news of the jet downings filtered through, was up 0.5 percent, Seoul added 0. 4 percent, Singapore was 0.2 percent lower and Manila shed more than 1 percent.

Sydney added 0.4 percent, Taipei was flat and Wellington was off 0.5 percent. (AFP)