MANILA (Bloomberg) - Asian equities fell, driving the region's benchmark index to its biggest loss in a month, on rising geopolitical risk after President Donald Trump warned the US will retaliate against North Korea, raising tension between the two countries.

The MSCI Asia Pacific Index slid 0.5 per cent to 160.41 as of 11:07 am in Hong Kong as more three stocks declined for each one that advanced.

Japan and South Korea equities slid as President Trump said further threats from North Korea, which was reported by Washington Post to have developed a miniaturised nuclear warhead that could fit onto its missiles, would be met with "fire and fury".

"A war is still far from erupting but, given recent gains and pricey valuation, prudence suggests it's best to capitalise on the rising geopolitical tension by taking some money off the table," said Mr Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank.

"Investors have a good excuse to stay on the sidelines."

Japan's Topix index was headed for its biggest slide since May 18 as the yen strengthened..

South Korea's benchmark equities gauge fell for a second day, dragged by Samsung Electronics Co and SK Hynix.

In Singapore, the stock market is closed for a public holiday to celebrate the country's National Day.

The MSCI Asia Pacific Index has rallied 19 per cent so far this year, last week posting its highest close since 2007 amid strong earnings from some of the region's key companies and optimism US interest rate increases will remain gradual.

The rally has pushed stock valuations to an almost two-year high.