By Ambar Warrick

-- Asian stocks were a mixed bag on Thursday as markets weighed a potential Chinese economic recovery against concerns over rising inflation and interest rates in the rest of the globe.

China’s and indexes kept to a tight range, with gains now cooling after a two-day rally. Data on Wednesday showed that in the country expanded at its sharpest pace in over a decade after the lifting of most anti-COVID restrictions.

Focus is now on an upcoming meeting of top-level Chinese officials this week, which could result in more policy changes in Asia’s largest economy.

Other China-exposed indexes saw some profit taking after a strong rally on Wednesday. Hong Kong’s index sank 0.8% after surging over 3% in the prior session, while the index was flat.

Hong Kong shares of property giant Co Ltd (HK:) slipped nearly 4% after the firm said it raised nearly $500 million in a share sale.

An overnight spike in U.S. Treasury yields pressured most Asian markets, as an unexpected rise in through February saw traders pricing in a greater possibility of stubborn inflation keeping U.S. interest rates higher for longer.

Hotter-than-expected data also heralded a similar reading from due later on Thursday, which could invite more hawkish moves from the .

The prospect of rising interest rates bodes poorly for Asian stocks, given that they limit foreign capital flows to the region. Regional central banks also hike interest rates to keep up with the , which keeps liquidity muted.

Weak economic readings also weighed on regional sentiment. South Korean slumped more than expected in January, while sank 2.1% as the country grapples with high inflation and rising interest rates.

But South Korea’s index surged 0.8% in catch-up trade, after a holiday on Wednesday.

Japan’s was flat as rose in the fourth quarter, even as business profits declined. Japanese was also weaker than expected in February, pointing to a potential decline in retail spending.

Australia’s was flat as gains in major mining stocks were largely offset by weak bank stocks. Australian plummeted far more than expected in January, as rising mortgage rates kept home buyers at bay.

India's and indexes sank 0.5% each ahead of a reading on due Friday.