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Asian stocks sink but Shanghai up after sharp losses

WT24 Desk

HONG KONG – Most Asian markets retreated Wednesday but Shanghai ticked higher after losing more than seven percent in the first two days of a volatile week for global investors, AFP reports.   The gains in China come after reports authorities on Tuesday pumped huge sums of cash into equities look to prevent a repeat of the summer’s rout that saw trillions of dollars wiped off valuations.

But analysts warned the moves would cause more problems down the line as China’s economy, the world’s second biggest and a key driver of global growth, heads for its worst annual performance in a quarter of a century.  Stocks in Asia, which swung wildly Monday and Tuesday, extended a miserable start to 2016 fanned by another round of weak Chinese economic indicators, sinking oil prices and rising tensions in the Middle East.

Shanghai was up 0.9 percent in morning trade.   It fell 0.3 percent Tuesday despite the People’s Bank of China pumping 130 billion yuan ($20 billion) into the money market, with reports that state-controlled funds bought equities.  Regulators had closed trading early Monday because the seven percent fall triggered a new circuit breaker put in place during the summer to prevent sharp losses or gains.

The losses had come as investors were spooked by the Friday expiration of a ban on selling stocks for certain investors, also announced in the summer. Bloomberg News reported Tuesday that regulators had asked the nation’s exchanges to tell companies that the ban will remain in force. The regulator did not confirm the report.
– More volatility ahead –
But Jorge Mariscal, the emerging-markets chief investment officer at UBS Wealth Management, said in New York that “these sorts of measures are going to backfire”.  While Shanghai enjoyed some buying, other regional markets retreated.   Tokyo fell 1.2 percent by the break as exporters were hurt by a strong yen, Hong Kong was 0.5 percent lower, Sydney fell 1.3 percent and Seoul shed 0.6 percent.

The losses came as reports emerged that North Korea had carried out another nuclear test, compounding worries about tensions in the Middle East and China’s economy.  Regional investors were not comforted by a mild rebound in US and European markets and and Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, warned of trouble down the line.

“There’s still quite a long list of things to worry about and this volatility is going to be with us for some time.   “We’re still cautious on China and think it gets worse before it gets better. It doesn’t help sentiment when you’re seeing such big moves.”  Dealers will be keeping a close watch on the release Friday of US jobs data, hoping for an idea about the Federal Reserve’s timetable for another interest rate boost following last month’s hike, which was the first in almost a decade.

Currency investors moved into safer investments, with the dollar and yen climbing.  The greenback was sitting at one-month highs against the euro, with the single currency buying $1.0739, while the British pound was near one-year lows at $1.4669.   But the dollar slipped to 118.47 yen, with the Japanese unit considered a go-to currency in times of turmoil and uncertainty.

– Key figures around 0240 GMT –

Tokyo – Nikkei 225: DOWN 1.2 percent at 18,151.77 (break)   Hong Kong – Hang Seng: DOWN 0.5 percent at 21,076.70    Euro/dollar: DOWN at $1.0739 from $1.0750 late Tuesday
Dollar/yen: UP 118.47 yen from 119.06 yen   New York – Dow: UP 0.1 percent at 17,158.66 (close)   London – FTSE 100: UP 0.7 percent at 6,137.24 points (close)

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