By Shruti Sonal
Jan 3 (Reuters) - Most Southeast Asian stock markets trimmed early gains on Friday as mounting Middle Eastern tensions dented sentiment, while the Philippine index closed 1.3% firmer after investors picked up beaten-down stocks.
Risk appetite across global markets faltered after U.S. airstrikes at Baghdad airport killed Iranian Major-General Qassem Soleimani, heightening geopolitical tensions.
Most regional markets pulled back from session highs yet ended in the black, with most of them posting solid weekly gains, as a steady growth in China's production activity and its central bank announcing a cut in banks' reserve ratio supported the mood.
Against the backdrop of a thaw in trade tensions between the United States and China, global markets had seen renewed appetite for risk assets.
"Investors appear to bet that the initial caution will pass, preferring to focus on the broader global recovery story," said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
The Philippine index .PSI on Friday rebounded from previous session's sharp decline to close at its highest in more than a week, underpinned by industrial and consumer stocks. The index gained 0.3% for the week.
"The PSE has managed to bounce from yesterday mainly on bargain hunting after the first day slump," said Nicholas Antonio Mapa, senior economist at ING.
Universal Robina Corp URC.PS and JG Summit Holdings Inc JGS.PS were the top percentage gainers in the benchmark index.
Thai shares .SETI closed flat after rising to their highest in more than five weeks.
Losses in industrial and healthcare stocks offset gains in energy shares that had rallied earlier in the day after the U.S. airstrike stoked concerns about oil supply disruptions.
Airports of Thailand Pcl AOT.BK fell as much as 2% following brokerage Jefferies' note that said it expected the company's domestic passengers growth to remain in a downward trend in 2020.
The Singapore index .STI was dragged lower by financials, but the benchmark posted weekly gains of 0.3%.
DBS Group Holdings DBSM.SI and Oversea-Chinese Banking Corp Ltd OCBC.SI slid about 1% each after China's Ant Financial, an affiliate of Alibaba Group Holdings BABA.N, said it had joined the race for a digital banking licence in the city-state.
Malaysian equities .KLSE ended 0.5% higher, lifted by healthcare and basic materials stocks, with the benchmark posting weekly gains of 0.1%.
Data showed that Malaysia's exports dropped for the fourth straight month in November, contracting 5.5% from a year earlier, though slower than the 6.7% fall recorded in October.
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(Reporting by Shruti Sonal; Editing by Sherry Jacob-Phillips)
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