The key Nikkei-225 index fell 140.62 points to end at 17,004.34 for the third straight daily loss. "Investors retreated to the sidelines as they waited for the GDP announcement," said Nomura Securities analyst Tatsuo Kurokawa of the data to be released early Friday. Friday's special quotation for the expiry of June's futures and options contract also preyed on investors' minds, he said.

"They also refrained from buying as they wanted to wait and see if any fears of inflation will arise from next week's US consumer price index release." Share prices in Hong Kong dropped 0.1 per cent in consolidation mode following recent sharp gains. "The market is trading in a narrow range as investors generally believe the market may consolidate further," following recent sharp gains, said Alex Tang, research director at Core Pacific-Yamaichi. The key Hang Seng index lost 23.13 points to close at 15,876.93, ending seven consecutive sessions of gains on a turnover of 9.27 billion HK dollars (1.2 billion US).

Dealers said investors still sidelined awaiting solid indications of the outlook for US interest rates. Anthony Mak, Vickers Ballas sales director, said "the market still lacks commitment and remains directionless. And usually, summer is a quiet period. Nothing can really excite the market too much." Singapore share prices closed 1.2 per cent higher on continued buying of selected blue chips after Wall Street's rise overnight, dealers said. The Straits Times Index rose 25.40 points to 2,060.27, while the broader All-Singapore Equities Index was up 6.13 points to 550.40. "Everybody's chasing a few stocks like Singapore Press. There's a lot of pent-up demand," a dealer with a domestic brokerage said.

Malaysian shares closed 1.5 per cent lower led by foreign funds selling index-linked stocks amid weak sentiment. The Kuala Lumpur Stock Exchange composite index ended down 13.00 points at 842.24.

A dealer with a local brokerage said foreign selling had not subsided. "Some foreign brokerages have adjusted their weighting recommendations and upgraded other regional bourses, so there has been some outflow of funds," she said.

South Korean share prices fell 2.7 per cent on institutional profit-taking. The Korea Stock Exchange index closed down 22.43 points at 800.11. Seoul Securities' Kim Jang-Hwan said the market may see a brief correction. "The market has risen too much too rapidly and it now needs a break but the upward trend is still alive given the unabating foreign interest and heavy trading volume and turnover." The market will rely on foreign interest as little fresh money is flowing in from local institutional investors, he added.

Thai share prices rose 1.1 per cent in lackluster trade as investors remained cautious, awaiting further indications of the direction of US interest rates. The Stock Exchange of Thailand (SET) index added 3.75 points to close at 344.58, and the select SET 50 edged up 0.30 points to 24.41. UOB Securities (Thailand) senior analyst Veerachai Krongsamsri said late buying mainly in telecommunications and banks helped offset profit-taking predominantly in finances. "The market moved in both positive and negative territory amid profit-taking. But late buying particularly in banks and telecommunications pushed the market to reverse from mid-afternoon losses," he said.

Indonesian share prices staged a surprise rally to close up 4.0 percent, driven by heavy buying of blue chip stocks led by Merrill Lynch, dealers said. The composite index closed up 18.748 points at 478.209. A dealer at a Singapore-based brokerage said there appeared to be no particular reason behind the strong rally, other than the buying by Merrill Lynch. "I think only Merrill Lynch knows the real reason for this market rally, the dealer said. Tremegah Securities institutional dealer Imelda Kwan said "it seems to me that everyone just followed Merrill Lynch's move. It is true that many big caps are still cheap, but I think people bought those stocks because they saw Merrill Lynch buying."