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Asian Markets at Close Report

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Jul 5, 2016

Asian Markets at Close Report, by MarketWatch on July 5, 2016: Asian Markets Slip, but Shanghai Gains on Hopes for Enterprise Reform

www.marketwatch.com

Shares in China bucked a slump across Asia on Tuesday, as Chinese investors became more hopeful about President Xi Jinping’s calls for state-owned enterprise reform.

Japan’s Nikkei Stock Average NIK, -0.67%  fell 0.7%, Australia’s S&P/ASX 200XJO, -1.02%  dropped 1%, and Korea’s Kospi SEU, -0.27%  lost 0.3%. Hong Kong’s Hang Seng Index HSI, -1.46%  was down 1.3%. China’s Shanghai Composite IndexSHCOMP, +0.60% however, gained 0.6%.
In most of Asia, caution before a key U.S. jobs report Friday kept investors from making big bets, analysts said. Last month’s release of starkly weak May jobs figures shook up markets, with traders concerned about the health of the U.S. economy.
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This time, investors are heading into the jobs data braced for surprises, and will “focus on consolidating portfolios rather than on taking on more risk,” Citigroup strategist Siddharth Mathur said.
In China, however, stocks rose on the hope that the government was serious about state-owned enterprise reform, and on expectations of increased military spending as tensions in the South China Sea continue to simmer. President Xi Jinping, in an official Xinhua News Agency article late Monday, called for efforts to enhance the competitiveness and efficiency of state-owned companies. State-owned China National Complete Plant Import & Export Corp. 000151, +10.03%  was up 10%, and Luoyang Glass Co. 600876, +3.91%  jumped 3.9%.
Meanwhile, mainland-listed shares of China’s largest home builder, China Vanke Co. Ltd. 000002, -10.00% sank 10% for the second day in a row, hitting the limit on how far share prices can move in one day in China. Shares had resumed trading Monday after a six-month halt. Investors continued to sell Tuesday amid concerns over a potential asset swap deal that will dilute shares. The asset swap is designed to thwart a hostile takeover that is in progress.
Elsewhere, Japanese stocks fell while the yen USDJPY, -0.90%  moved stronger in the morning to last trade at 101.76 to one U.S. dollar. A strong yen increases the costs and weakens the foreign-currency returns of exporters and manufacturers.
In Australia, stocks extended Monday’s losses as officials continued counting votes following the weekend’s inconclusive federal election results. Traders are worried about a hung parliament, which would create political gridlock. Investors are also cautious ahead of the Reserve Bank of Australia’s interest-rate decision due later Tuesday.
A decline in the price of Brent crude oil LCOU6, -4.35%  Tuesday morning to below $50 a barrel, a psychologically important level, also suppressed shares of oil producers in A sia. Australia’s Woodside Petroleum Ltd. WPL, -1.08% slipped 1.1% and the Chinese state-owned China Petroleum & Chemical Corporation0386, -1.78%  fell 1.4% in Hong Kong.
In other markets, Chinese authorities guided the yuan CNYUSD, -0.1273%  0.2% weaker versus the U.S. dollar, compared with Monday’s benchmark. The yuan’s daily midpoint was fixed at its weakest level to the dollar since 2011.