Hong Kong's blue chip Hang Seng Index led the way up after two days of spectacular falls. Markets in Tokyo, Singapore, Thailand and Manila also gained ground but Korea and Taiwan fell. Jakarta and Kuala Lumpur were closed for a holiday marking the end of the Ramadan fasting month.

The tech-heavy US Nasdaq's third straight decline fuelled more selling of Asian technology shares, but investors held their nerve and bought instead into traditional sectors. The Dow Jones industrial average rallied 1.17 percent on Thursday. "What's happening here (in Asia) is profit-taking that has come in quite hard in response to the very sharp run in the last couple of weeks," said Patrick Tan, director at Rothschild Asset Management in Singapore.

"In essence, we have given back the gains that were achieved in December. But put in perspective, the sizeable gains of the past year do merit some degree of correction," Tan told Reuters Television.

Asian markets are also eyeing US jobs data to be issued on Friday. Economists expect the Labor Department to report that around 224,000 jobs were created in December, leaving the jobless rate steady, and a 0.3 percent rise in average hourly earnings.

Taipei shares finally succumbed to the technology-led selling that has plagued the rest of the region all week, ending 0.82 percent lower despite some buying of more traditional sectors.

Profit-taking by foreign funds, which have sold a net T$3billion (US$97 million) in the past two days, also weighed on sentiment with investors shrugging off a widely expected rise in exports. Taiwan reported that exports rose 22.1 percent year-on-year in December and imports rose 10.7 percent for a $743 million trade surplus - slightly above the average of market forecasts and a turnaround from December 1998's $261 million deficit.

For 1999 as a whole, Taiwan's trade surplus rose almost 85 percent from a dismal 1998. Exports jumped 10 percent and imports were up almost six percent for all of last year.

Rothschild's Tan remained upbeat about the Taiwan market, noting profit upgrades at many technology firms, the trade data and that Taipei shares had lagged their regional counterparts.

But chartists said the TAIEX might reverse the last month's uptrend, especially if the market gaps lower on Saturday. A breakaway, measuring and exhaustion gap on the TAIEX chart over the past month signal a bearish technical outlook. If the Nasdaq takes another pounding and Taiwan shares open lower as a result, it would cause an island reversal top, which is a classic trend-reversal pattern.

The market is then likely to head lower to fill the latest gap, with initial support near its base at 8,500 points. The Philippine peso perked up as offshore players considered Finance Secretary Edgardo Espiritu's resignation on Wednesday.

Concerns about president Joseph Estrada's administration persisted, but analysts said Espiritu's departure removed a potential conflict between the finance ministry and central bank.

"Not only does Espiritu's resignation resolve a number of conflicts in government, but his low-interest-rate and high-deficit approach risked undermining the Philippine peso," said Simon Flint, senior currency strategist at Bank of America. Analysts said Espiritu's likely successor, Trade Secretary Jose Pardo, was committed to curbing the budget deficit and had worked well with the central bank.

The peso was expected to target 40.20 per dollar in the absence of near-term corporate dollar demand. Manila shares dragged their feet ahead of an expected cabinet reshuffle on Saturday.