Hong Kong stocks fall as stimulus rally fizzles; Japan's Nikkei leads gains in Asia

• The Japanese yen weakened against the U.S. dollar, a day after clocking its largest single-day decline since June 2022.
• Markets in mainland China will remain closed until Oct. 8 for a week-long holiday and South Korea will be shut Thursday for National Foundation Day.
• Taiwan markets were shut for a second day as Typhoon Krathon brings torrential rain on the island.

Hong Kong stocks plunged on Thursday as the China stimulus rally appeared to ease.

The Hang Seng index fell 3%, coming off a strong session on Wednesday when the index closed over 6% higher after hitting a 22-month high.

Hang Seng Mainland Properties Index briefly sank more than 10%, dragged down by Longfor Group Holdings losing 12.8% and New World Development falling 10%. Hang Seng Tech Index fell over 6%.

Markets in mainland China remain closed until Oct. 8. Chinese stocks had been on a tear after authorities announced a slew of support measures last week.

Beijing is widely anticipated to unleash more fiscal policies and support measures in the coming months, but "the eventual scale and content of the fiscal package might be quite improvised and uncertain," Ting Lu, chief China economist at Nomura said in a note, adding that investors should exercise "more sober assessment" amid the recent market frenzy.

Elsewhere, most Asian markets traded higher, with Japan's Nikkei 225 leading with 2.1% gains. The broad-based Topix added 1.3%. The uptick came as the yen slid to as weak as 147.15 against the U.S. dollar, a day after clocking its largest single-day decline since June 2022.

On Wednesday, Japan's new prime minister, Shigeru Ishiba, told reporters economic conditions don't currently support another rate hike. Ishiba made his comments after meeting with Bank of Japan Governor Kazuo Ueda.

Investors will parse through the busy slate of data out Thursday. Australia's seasonally adjusted Judo Bank Composite PMI data came in at 49.6 in September, lower from the 51.7 in August, falling past the 50 neutral mark. The services PMI posted 50.5, down from 52.5 in August.

The Australian Bureau of Statistics reported the country's trade surplus came in at 5.64 billion Australian dollars ($3.87 billion) in August, higher than the AU$5.5 billion estimated in a Reuters poll but down from AU$6.01 billion in July. Both imported and exported goods contracted 0.2% from the previous month, the data showed.

Australia's S&P/ASX 200 jumped 0.25%.

Japan's au Jibun bank composite final PMI, which takes into account both manufacturing and service activities, for September stood at 52.0, signaling a softer expansion in the private sector compared to 52.9 in August, according to the private survey conducted by S&P Global Intelligence. The service sector PMI, compiled from around 400 survey responses, was 53.1 in September, lower than the 53.7 in August.

Other data on tap include August retail sales from Hong Kong.

South Korea were shut Thursday for National Foundation Day. Taiwan markets remain closed for a second day as Typhoon Krathon approached, bringing strong rain and heavy winds.

Elsewhere, Middle East conflicts were in focus this week as markets brace for more uncertainty in the region. Israel started a ground operation into Lebanon and conducted more airstrikes, while Iran launched a ballistic missile attack in retaliation for its recent killing of Hezbollah leader Hassan Nasrallah.

Overnight in the U.S., the three major U.S. indexes closed slightly above the flatline as Middle East tensions weighed. The S&P 500 added just 0.01% to close at 5,709.54, and the Dow Jones Industrial Average added roughly 39 points to close at 42,196.52. The Nasdaq Composite gained 0.08% to 17,925.12.