Asian Shares: China Shares Break Three-Day Losing Streak

By Chao Deng 

        China's shares ended higher Wednesday as officials stepped up efforts to calm markets, while other Asian shares were roughly flat, with focus shifting to corporate earnings and the Federal Reserve's monetary-policy meeting.
        The Shanghai Composite gained 3.4%, ending at 3789.16, after flitting between gains and losses earlier. The smaller Shenzhen Composite rose 4.1% to 2198.81.
        Hong Kong's Hang Seng Index is up 0.6% while a gauge of Chinese companies listed in the city is up 1%.
        The gains follow three days of selling, which knocked 11% from China's main stock index. Shanghai remains down more than a quarter from its June high and is only up 3.7% from the worst of its selloff earlier in the month.
        "While it is far too soon to see if the market has reached a more stable level...it seems that the comments by authorities, reassuring investors about their commitments to support the market, are working," said Gerry Alfonso, Shanghai-based director of trading at Shenwan Hongyuan Securities.
        Officials have come out to soothe investor concerns amid the second bout of selling this month. On Tuesday afternoon, China's securities watchdog said it would investigate whether a coordinated dumping of shares sparked Monday's selloff. Late Monday, the regulator said it would increase its support to the market.
        "The market must generate a wealth effect so that investors can regain confidence," said Tang Yonggang, another analyst at Shenwan Hongyuan Securities, adding that state-backed funds may be getting diverted to infrastructure and military stocks.
        Still, many investors remain cautious. Shanghai has swung wildly intraday. On Tuesday, the benchmark vacillated in a 6% band, though it ended the day off just 1.7%.
        In the wake of the volatility, the number of new stock investors in China has dropped to a record low. Investors opened 390,600 new stock trading accounts in the week ended July 24, down 26% from the previous week, according to the database CEIC, citing the China Securities Depository and Clearing Corporation.
        The latest round of heavy selling appears to have further flushed out borrowing by investors to make bigger bets on the market. Margin financing fell to 1.38 trillion yuan ($222.26 billion) Tuesday, the lowest since March 19, according to the latest data by Wind Information Co, from 1.43 trillion yuan on Monday.
        Still, hundreds of billions of yuan remain in the form of margin financing from unofficial lenders, such as Internet-financing platforms that authorities are looking to monitor more closely.
        While most global markets have been insulated from the erratic swings in Chinese stocks in recent weeks, the moves nevertheless have stoked fears about whether a rout in the world's second-largest economy will weigh on global growth.
        "Worries over China markets and Chinese economic growth had distracted investors enough that weakened forecasts from major Japanese corporates ended up constituting major shocks," said Yoshihiro Okumura, general manager at Chibagin Asset Management. Disappointing earnings in Japan pushed the Nikkei Stock Average down 0.1% on Wednesday.
        "Economic growth concerns underpin most concerns regarding equities, and as such, there remains much to fear regarding China--and also the U.S. as the Fed plans to raise interest rates soon. The impact of China on Fed policy will be on close watch," Mr. Okumura added.
        Meanwhile, South Korea's Kospi was flat and Australia's S&P ASX 200 was up 0.7% after gains overnight in the U.S. and Europe helped retrace deep losses from Monday.
        Commodities, battered by a stronger U.S. dollar and worries about China's slowdown, continued to slide. China is one of the world's largest consumers of oil, metals and food. A stronger dollar is bad news for commodities, many of which are priced in the currency, because it becomes more expensive for foreign buyers.
        Brent crude, the global oil benchmark, fell Tuesday to its lowest price since January amid concerns about glut. Crude oil futures were down 18 cents at $47.80 a barrel. Both Brent and the U.S. oil benchmark recently entered bear markets--defined as a 20% drop from a recent high.
        Expectations the U.S. will raise interest rates soon has tarnished gold, which has hit multiyear lows in the past week, as investors consider moving to higher-yielding assets. Spot gold is roughly flat in Asia trade at $1,097.10 an ounce.
        Yifan Xie and Bradford Frischkorn contributed to this article.
        Write to Chao Deng at Chao.Deng@wsj.com
        (END) Dow Jones Newswires

        July 29, 2015 03:13 ET (07:13 GMT)

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