Site Map
Showing posts with label Corrected: Asian markets at Close Report by MarketWatch: June 25. Show all posts
Showing posts with label Corrected: Asian markets at Close Report by MarketWatch: June 25. Show all posts

Jun 25, 2013

Corrected: Asian markets at Close Report by MarketWatch: June 25, 2013.

By V. Phani Kumar, MarketWatch
An earlier version of this story gave incorrect timing for the Lujiazui Forum. The story has been corrected. 

HONG KONG (MarketWatch) — Mainland Chinese stocks ended mildly lower Tuesday, staging a major recovery after sustaining steep losses during the session, as speculation that policy makers would elaborate on the ongoing credit crunch pulled in bargain buyers. 

The Shanghai Composite Index had plunged as much as 5.8% earlier in the day on heightened worries about the economic impact from high borrowing costs in the interbank money markets. It recovered most of the lost ground to finish the day 0.2% lower at 1,959.51. 

The session marked the 14th decline for the Shanghai Composite in 16 trading days. At Tuesday’s close, the benchmark is down 19.5% from the 52-week peak it reached on Feb. 6. 

The Shenzhen Composite CN:SHCOMP -0.19% , which had slumped more than 7%, also charted a similar course to end 0.2% down at 879.93. 

The recovery came on news that policy makers from multiple Chinese agencies, including the People’s Bank of China, and the banking and capital market regulators, would address the media later this week at the Lujiazui Forum — a conference on major financial issues facing China. 

Andrew Sullivan, a director of sales trading at Kim Eng Securities, said the recovery in markets followed speculation that the agencies will meet and discuss markets and liquidity in the banking system.
“The press conference was a set event. What has changed is that the members .... are prepared to answer reporters’ questions,” he said. 

Peter Lai, an independent veteran stock commentator, said news of the press conference led investors to cover their short sales in the Shanghai afternoon session. He said that while volatility was likely to persist, a bounce was expected going forward as the markets were “oversold.” 

Meanwhile, People’s Bank of China deputy director Ling Tao said at a news briefing in Shanghai on Tuesday that the recent volatility in the short-term interest rates in the money markets were likely to be “temporary.” He said the central bank will guide interest rates to a “reasonable range,” without elaborating on what constituted such a range. 

“Some seasonal factors will gradually disappear,” he said, adding that there was abundant liquidity in the interbank markets and that risk was largely under control. 

Major Chinese banks led the recovery, despite losses suffered by most stocks.
Shares of Agricultural Bank of China Ltd. CN:601288 +1.21% ACGBY -1.84% and Bank of China Ltd. CN:601988 +1.18% BACHY -2.72%  climbed 1.2% each in Shanghai.
Shares of several other lenders cut their losses, with China Minsheng Banking Corp. CN:600016 -0.82%   CMAKY -7.54%  dropping 0.8% and China Citic Bank Corp. CN:601998 -0.56%   CHBJF -18.70%  losing 0.6%.
Other regional markets, which had tumbled earlier in the day as losses in Shanghai steepened, also narrowed their declines.

Shutterstock Enlarge Image
China markets drag the rest of Asia down in another sharp selloff

Japan’s Nikkei Stock Average JP:NIK -0.72% ended the day 0.7% lower, while Hong Kong’s Hang Seng Index HK:HSI +0.21% rebounded in afternoon trading to end the day 0.2% higher. 

Elsewhere, Australia’s S&P/ASX 200 AU:XJO -0.28% dropped 0.3% and South Korea’s Kospi KR:SEU -1.02%  lost 1%. 

U.S. equity index futures also rebounded from the day’s lows, with Dow Jones Industrial Average DJIA -0.94%  futures gaining 37 points, or 0.3%, to 14,625. 

“The global selloff has accelerated after China credit issues have increasingly become a concern for investors,” said Rivkin Securities global analyst Tim Radford. 

However, “with the rising repo rates in China a product of intentional government intervention, the selloff is getting to a point whereby it looks overdone," he said. 

The volatility in mainland Chinese bourses came a day after the Shanghai Composite Index plunged 5.3% for its worst finish in nearly four years, sparking a selloff in global equities, including on Wall Street. 

U.S. slams China over Snowden
The U.S. sharply dials up international pressure on Russia and Ecuador in the hunt for Edward Snowden

The extreme moves reflect fears that the Chinese central bank’s decision not to ease liquidity conditions in the Shanghai money markets would hurt small and medium-sized banks and borrowers, increasing uncertainty over the economic outlook. 

“We are cautious at the moment and continue to watch the unfolding situation, as we believe the biggest risk comes from the [People’s Bank of China] potentially mishandling the situation,” Bank of America Merrill Lynch’s China economist Ting Lu said Tuesday, before the stock recovery began.
In a statement on Monday, the People’s Bank of China had said the liquidity in the financial system was “reasonable” and that lenders must manage their own liquidity risks. 

“In our view, dealing with banks in breach of regulations should be done by improving prudential regulations rather than engineering an interbank credit crunch which could potentially backfire should banks lose mutual trust,” Merrill Lynch’s Lu said. 

He was referring to recent reports that the Chinese central bank’s tolerance of high interest rates was in part aimed at punishing some lenders that had been using the low-cost funds previously borrowed in the interbank market to invest in wealth-management products and other securities offering better returns. 

Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.

Latest Post Published

Economists Advise China Over its Economy | Monday, May 16, 2022: