After initially sliding, regional stocks and emerging Asian currencies pared early losses following the unexpected downgrade of China, taking their cue from the "sudden reversal" of the Shanghai Composite Index, which some speculated saw the latest intervention of the "national team."

Moody's action on China briefly rattled Asian markets, but against a backdrop of strengthening global growth and the impending release of minutes from the Federal Reserve's latest meeting, investors appeared to quickly move on. MSCI's broadest index of Asia-Pacific shares outside Japan was unchanged while Japan's Nikkei stock index ended 0.7 percent higher. 

The Shanghai Composite gained 0.1% at the close, reversing an early decline of 1%, while the offshore yuan inched up. As reported last night, the major overnight catalyst in Asia was Moody's downgrade of China's credit rating to A1 from Aa3 in early Asia trading, citing a worsening outlook for the nation's financial strength - in the end of the Chinese session it had little impact, aside from another steep selloff in iron ore, which traded nearly limit down. The downgrade impact on regional currencies was likewise limited as Asia's economic growth is seen to be improving and there are still positive stories such as S&P's upgrade of Indonesia's rating last week.

By the end of the session, nobody even remembered China had been downgraded: the Shanghai Composite rose 0.1 percent, reversing a drop of 1.3 percent. The Hang Seng also ended higher after an earlier decline of 0.4 percent. Japan's Topix index climbed 0.6 percent, while Indonesia's benchmark index slumped 0.7 percent. The Australian dollar slipped 0.1 percent, paring a steeper drop of as much as 0.5 percent.