China woes weigh on Asia, yen up as BoJ holds fire

 

HONG KONG – Shanghai led most Asian shares lower on Tuesday as China’s economic woes keep investors on edge, while Japan’s Nikkei gave up early gains and the yen rallied after the country’s central bank held off fresh measures to shore up its torpid economy.

While the China-fuelled global volatility that has characterised much of the past month’s trading has eased off, the morning’s confidence waned as traders moved out of higher-yielding, or riskier, assets while they await a key US interest rate decision this week. The Australian dollar, given an early boost by news the popular Malcolm Turnbull would replace Tony Abbott as prime minister, relinquished initial gains.

Traders in Shanghai took more money off the table, as a string of weak data trumps a weekend announcement that Beijing was planning a liberalisation of state-owned enterprises, including some privatisation. Soft readings Sunday on industrial output, retail sales and investment – combined with a contraction in factory activity and plunging producer prices – have added to fears the Chinese economy and key driver of world growth is heading for a hard landing.

Also, Beijing’s decision to devalue the yuan last month reinforced fears the leadership is struggling to control the crisis, sending shockwaves through world markets. “Signs that China’s economy is going through a deeper slowdown are becoming more clear,” John Teja, a Jakarta-based director at PT Ciptadana Securities, said.

Analysts also said a crackdown on illegal trading had also hit the market. On Monday authorities said they were cracking down on thousands of stock accounts linked to illegal trading, in its latest bid to restore order to markets pummelled by a rout that has wiped trillions off valuations in the country in three months.

“The market took the crackdown on accounts engaged in illegal trading harder than what the market regulator said,” Haitong Securities analyst Zhang Qi told AFP. “And the falling prices in turn strengthened selling momentum.” Leaders have launched an unprecedented rescue package – including government-backed entities buying equities – since the Shanghai market began crashing. It has lost about 40 percent since hitting a June 12 peak. On Tuesday Shanghai finished 3.52 per cent down, the heaviest loss since late last month and extending a 2.67 per cent fall suffered on Monday.

Hong Kong lost 0.49 per cent by the close and Sydney – where several firms with links to China are listed – closed down 1.53 per cent. Despite recent turmoil across world markets and data showing Japan’s economy remains weak, the BoJ on Tuesday refused to unveil any further stimulus saying it has continued to recover moderately.

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