asian markets were mixed in afternoon trade tuesday, weighed down by the prospect of rising u.s. interest rates and a debt-for-equity swap in china that could hit bank profits. earlier in the day, rising crude oil prices and weaker local currencies helped boost asian share markets. but by the end of asian trading, the picture had changed. hong kong<u+2019>s hang seng index reversed early gains to close 1.4% lower. australia<u+2019>s s&p/asx 200 closed up 0.1%. the nikkei stock average closed up 1% led by exporters that benefited from a weaker yen, and the shanghai composite index ended up 0.6%, building on monday<u+2019>s 1.5% rise, as chinese investors returned from a week-long national holiday. china<u+2019>s domestic shares extended their rally tuesday over hope that a debt-for-equity swap <u+2014>announced monday by china<u+2019>s cabinet<u+2014>would address the country<u+2019>s mounting bad corporate debt. <u+201c>the purpose of the swap program is to reduce leverage and prevent debt risk,<u+201d> said li lifeng, an analyst at sinolink securities, adding that large state-owned enterprises will benefit more from the policy, especially in sectors plagued by overcapacity, such as steel and coal. however, news of the debt-for-equity plan hit the hong kong shares of china<u+2019>s big banks. china construction bank, industrial & commercial bank and bank of china all finished the day off 2.2%. the plan will force china<u+2019>s banks to accept equity in insolvent companies, which investors<u+2014>and bank executives<u+2014>fear will saddle banks with near worthless stock. property stocks also hit the hang seng index, with the property subindex down 2.8%, after a string of chinese cities announced new housing purchase restrictions to cool the overheated property market. among blue chip chinese developers, china resources land fell 3.9% and china overseas land & investment closed down 3.8%. however, hong kong listed shares of china unicom jumped as much as 6.3% on news that its state-owned parent could be a candidate to participate in china<u+2019>s mixed-ownership reform, a move by beijing to introduce private capital into government assets. elsewhere, asian investors were encouraged by signs that donald trump<u+2019>s presidential campaign was struggling, according to alex furber, a senior client services executive at cmc markets. <u+201c>there is going to be general relief<u+2026>at the prospect of a trump win receding,<u+201d> mr. furber added, following the second u.s. presidential debate. markets are less favorable to trump because he wants to restrict global trade with the u.s., said analysts. on monday, crude oil prices hit a one-year high in the u.s., after russian president vladimir putin said the country would support an attempt by the organization of the petroleum exporting countries to cut its collective output. crude prices gave up some of their gains in asian trade tuesday on profit-taking by oil traders. despite that, the price of brent, the international benchmark, hovered around the $53-a-barrel mark. meanwhile, a stronger dollar weighed on asian currencies. the u.s. dollar, which was stronger on expectations of a rate rise, gained 1.1% against the korean won in asian trade, as foreigners dumped shares in samsung electronics . samsung electronics<u+2019> woes weighed on korean stocks and the korean won, said jingyi pan, a foreign exchange analyst at brokerage firm ig. the kospi closed down 1.2% and the korean won was also off 1.2% against the dollar. the electronics company<u+2019>s stock closed down 8% after it halted production and distribution of its flagship galaxy note 7 smartphone because of issues with batteries overheating. the japanese yen slipped 0.3% against the greenback with the taiwan dollar trading 0.7% weaker as well. <u+2014>yifan xie, joanne chiu, jasper moiseiwitsch, jonathan cheng, eun-young jeong and gregor stuart hunter contributed to this article. write to kenan machado at kenan.machado@wsj.com
asian shares reverse earlier gains - wsj
kenan machado