Asian Shares: China Shares Teeter On Losses

By Chao Deng 

        China's shares flitted between positive and negative territory Wednesday as officials stepped up efforts to calm markets, while other Asian shares recovered from recent losses with focus shifting to corporate earnings and the Federal Reserve's monetary-policy meeting.
        The Shanghai Composite was down 0.8% at 3634.17, after trading as high as 1.6% earlier. The smaller Shenzhen Composite was down 1% at 2088.71, giving up gains of 2.3%.
        The wavering comes after 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.
        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%.
        Investors also have alternated their buying and selling of small- versus large-cap stocks since Monday, when blue chips, usually considered safer bets, fell sharply on worries that government-backed funds were withdrawing their support.
        While blue chips, including banks and brokerages, bounced back Tuesday, that's when small caps took a hit. Meanwhile, on Wednesday, blue-chip gains abated, with a gauge of Shanghai's largest 50 stocks down 0.4%, and startup stocks on the ChiNext market fell 1.3%.
        Mr. Alfonso noted that another small selloff could push investors back into large caps as a safety bet.
        The latest round of heavy selling appears to have further flushed out borrowing by investors to make bigger bets on the market. Margin financing was at 1.38 trillion yuan ($222.26 billion) Tuesday, the lowest since March 19, according to the latest data by Wind Information Co, and compared with 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 0.5% 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 up 0.6% and Australia's S&P ASX 200 was up 1% 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 also 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 16 cents at $47.82 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 down $1.50 to $1,094.90 an ounce in Asia trade.
        Bradford Frischkorn contributed to this article.
        Write to Chao Deng at Chao.Deng@wsj.com
        (END) Dow Jones Newswires

        July 28, 2015 23:05 ET (03:05 GMT)

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