Asian Shares Mixed as Stronger Yen Caps Gains in Nikkei

Stocks in Asia were mixed on Wednesday, in a largely muted reaction to a record high in U.S. stocks, while a stronger yen put pressure on Japan’s Nikkei Stock Average.

The Nikkei closed down 0.2% after having edged higher in afternoon trade, as the yen strengthened around 0.5% against the U.S. dollar, raising the hurdle for local exporters.

A strong yen erased some ¥492.2 billion ($4.85 billion) in earnings at Japan’s seven major auto makers in the April-June quarter, according to Nomura Securities analyst Masataka Kunugimoto.

As a result, the aggregate operating profits fell 10% on year, but they were up 24%, if the impact from yen gains was excluded, Ms. Kunugimoto said, adding that “the underlying picture remained buoyant.”

Among Japan’s biggest auto makers, Mazda Motor Corp. was down 1.9%, Honda Motor Co. fell 1.0% and Toyota Motor Corp. lost 1.1%.

Elsewhere in Asia, Hong Kong’s Hang Seng Index shed gains to decline 0.1%, while the Shanghai Composite Index fell 0.1%. South Korea’s Kospi ended the day flat.

While China stocks fell, investors were piling into the country’s domestic bond market on expectations of monetary easing this year. This sent 10-year government bond yields to below 2.7% earlier in the session, a historic low, according to Commerzbank AG. Bond yields move inversely with prices.

The China 10-year benchmark bond was last yielding 2.750%, Thomson Reuters data showed.

Overnight, the Nasdaq Composite closed at a record, with the S&P 500 closing a little short of its record close on Friday, which came after a strong July U.S. jobs report.

“Although the U.S. market hit new highs again, in terms of the number of points, it was still quite small,” said Margaret Yang, a market analyst at CMC Markets.

Meanwhile, oil prices fell slightly after posting strong gains in the previous session, weighing on the shares of large commodity-producing countries. Australia’s S&P/ASX 200 closed down 0.2% and the FTSE Bursa Malaysia Index was down 0.03%.

Among oil stocks in Australia, Santos Ltd. declined 1.7% and Oil Search Ltd. was down 1.3%.

In Hong Kong, the Hang Seng Property Index reversed gains, falling 0.4% on more profit-taking pressure after a strong run with developers showing strong sales recently.

Low interest rates and low yields world-wide have sent global investors into Hong Kong property stocks as a hedge against volatile currency movements, since the Hong Kong dollar is pegged to the U.S. dollar.

Additionally, the high dividend yields of Hong Kong property developers, which average about 3%, are attractive, said Alfred Lau, an analyst for Bocom International.

“Investors will try to avoid this currency exposure and look for U.S. dollar assets,” Mr. Lau said. “They will look to Hong Kong property as a hedge. The main reason is still big currency movements that lead to demand for Hong Kong, or essentially, U.S. dollar assets.”

Sino Land Co. was last down 0.4%, while Sun Hung Kai Properties Ltd. fell 1.3%.

Elsewhere, the Bank of England failed to buy as many government bonds as it wanted for its quantitative-easing program on Tuesday, just two days after the central bank rebooted a multibillion-pound bond-buying effort to stimulate the U.K. economy. Investors refused to sell gilts to the central bank, as they seek a better price for the bonds.

U.K. banks listed in Hong Kong saw buying interest on Wednesday, with HSBC Holdings PLC rising 0.7% and Standard Chartered PLC notching 2.4%, partly on the view that their holdings of U.K. government bonds are appreciating in value.

Looking further ahead, the market is expecting a 25-basis-point cut in interest rates from the Reserve Bank of New Zealand on Thursday, which will likely boost liquidity and lift sentiment, Ms. Yang said.

–Kenan Machado, Dominique Fong and Megumi Fujikawa contributed to this article.