Asia stocks firm, oil hits 5-month peak on Iran sanctions report

TOKYO -- Asian shares were steady on Monday as investors took stock of recent data suggesting global growth may be stabilizing, while oil prices spiked on a report the US is likely to ask all importers of Iranian oil to end their purchases or face sanctions.

Brent futures rallied to a five-month high, after the Washington Post said US Secretary of State Mike Pompeo will announce "that as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate."

The potential disruption to Iranian supplies are expected to add to an already tight oil market.

"The US chief Iran hawks indeed have the President's ear as (Secretary of State) Pompeo and (National Security Advisor) Bolton are singularly focused on bringing Iran's economy to its knees," said Stephen Innes, head of trading at SPI Asset Management.

"Predictably oil prices are rising," he said.

Equities markets were subdued as investors awaited the resumption of trading in major centers from the Good Friday holiday, with MSCI's broadest index of Asia-Pacific shares outside Japan little changed in early deals.

The index was within reach of a 9-month peak scaled on Thursday after Chinese economic data beat expectations and eased concerns about the health of the world economy.

The advance, however, slowed as many markets in Asia, Europe and North America shut down for Good Friday.

"Equities will be looking at further corporate earnings for immediate incentives. While strong economic indicators, particularly from China, have helped sentiment, they have not formed a strong trend," said Soichiro Monji, senior strategist at Sumitomo Mitsui DS Asset Management in Tokyo.

"The US-China trade talks will have to end in one way or another for a trend to form."

The Shanghai Composite Index slipped 0.3 percent, South Korea's KOSPI edged up 0.1 percent and Japan's Nikkei added 0.15 percent.

In currencies, the dollar index against a basket of six major currencies was a touch lower at 97.377.

The index was still within touching distance of a 1-1/2-month peak reached on Thursday after steady US retail sales data.

The euro was little changed at $1.1241, having taken a hit late last week after purchasing managers' index (PMI) releases showed weak manufacturing activity in Europe.

The dollar was steady at 111.96 yen.

The Australian dollar, sensitive to shifts in risk sentiment, inched down 0.2 percent to $0.7141.

The Canadian dollar, on the other hand, added 0.25 percent to C$1.3363 thanks to a bounce in crude oil prices.

Brent crude rose roughly 1.7 percent to $73.24 per barrel , highest since Nov. 7, 2018, underpinned by the Washington Post report.

US crude futures climbed to $65.12 per barrel, highest since Nov. 1, 2018.

The US reimposed sanctions in November on exports of Iranian oil after President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers. Washington is pressuring Iran to curtail its nuclear program and stop backing militant proxies across the Middle East.

Crude extended gains from last week, when a drop in crude exports from OPEC's de facto leader, Saudi Arabia, and a draw in US drilling rigs and oil inventories supported prices. 

source: news.abs-cbn.com

Asia stocks reach 5-week high, yuan makes big weekly gains

TOKYO -- Asian stocks inched up to five-week highs on Friday, after Chairman Jerome Powell reiterated the Federal Reserve will be patient about raising interest rates and news that trade talks between Washington and Beijing are moving to higher levels.

As the Fed's dovish stance kept a lid on the dollar, China's yuan rose to its highest levels in more than 5 months and was on course for its biggest weekly gains since the 2005 revaluation in onshore trade.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent to the highest levels since Dec. 6, while Japan's benchmark Nikkei advanced 0.7 percent. Shanghai Composite Index initially rose 0.8 percent, but that was pared to just 0.1 percent.

Wall Street extended its rally into a fifth straight day on Thursday in a whipsaw trading session as investors responded to mixed comments by Powell, while a warning from Macy's pummeled retail stocks.

At the Economic Club of Washington, Powell reiterated the views of other policymakers that the Fed would be patient about interest rate hikes.

Major US stock indexes also quickly recovered from brief losses after Powell said that the Fed's balance sheet would be "substantially smaller".

"The word 'patient' is used often when the Fed's policy direction is still tightening but its next rate hike can wait for a considerable time. So risk assets now enjoy support from what we can call Powell put," said Tomoaki Shishido, economist at Nomura Securities.

"Similarly, Trump also softened his stance on China after sharp falls in stock prices. He has offered an olive branch to China and there's no reason China would not want to accept it," he said.

US and Chinese officials are working on arrangements for higher-level trade talks after mid-level officials this week discussed US demands that would require structural change in China to address issues such as IP theft, forced technology transfers and other non-tariff barriers.

US Treasury Secretary Steven Mnuchin said late on Thursday that Chinese Vice Premier Liu He will "most likely" visit Washington later in January for trade talks.

"For markets the upshot is that the outlook for 2019 is looking better as tensions de-escalate, creating the potential for a re-rating of risk assets as the tail risk of a near-term trade war is partially priced out," said Jeremy Lawson, chief economist at Aberdeen Standard Investments in Edinburgh.

"This is especially the case in Asia," he added.

Still, fundamental tensions between the US and China "are unlikely to go away and there is a high likelihood that any agreement to suspend tariffs eventually breaks down when it becomes clear that Trump’s objectives cannot really be met."

Some investors are also increasingly wary of lingering disputes in Washington over a wall Trump wants on the US-Mexico border, which has led to a weeks-long partial government shutdown.

Flanked by border agents who are going without paychecks during the shutdown, Trump again threatened on Thursday to declare a national emergency to bypass Congress to fund a wall.

In the foreign exchange markets, the dollar was broadly soft after a small rebound from three-month lows the previous day.

The dollar index, measuring it against major peers, dipped 0.1 percent to 95.38.

The euro firmed 0.2 percent to $1.1523, while the dollar dipped 0.1 percent to 108.28 yen.

The yuan, both onshore and offshore, climbed to the highest levels since late July, aided by a weaker dollar and rising hopes of progress in the US-China talks.

In onshore trade, the Chinese currency has risen 1.6 percent this week, the biggest gain since July 2005 when Beijing abandoned the yuan's peg to the dollar.

US Treasury debt prices erased early gains after a soft 30-year bond auction and in reaction to Powell's comments on the Fed "substantially" reducing the size of its balance sheet.

The 10-year U.S. Treasuries yield last stood at 2.728 percent.

Crude prices held near one-month highs, but a more than week-long in oil rally slowed as optimism surrounding US-China trade talks faded a little.

In Asian trade, West Texas Intermediate crude futures slipped 0.6 percent to $52.30 per barrel. 

source: news.abs-cbn.com

Chinese stocks jump at open after MSCI decision

SHANGHAI - Shanghai rose at the beginning of trade Wednesday after US-based index compiler MSCI agreed to include mainland-listed shares in its benchmark of emerging markets.

The benchmark Shanghai Composite Index rose 0.29 percent, or 8.98 points, to 3,148.99, bucking a regional retreat.

The Hang Seng index in Hong Kong fell 0.35 percent, or 90.77 points, to 25,752.27.

source: news.abs-cbn.com

Asian shares flat as China trade data weighs

SINGAPORE/TOKYO - Asian shares were flat on Wednesday, as weak Chinese export data offset a brightening energy sector outlook and an expected delay in interest rate hikes by the U.S. Federal Reserve.

The MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent, amid subdued risk appetite as markets braced for weak May trade data out of China due today.

Japan's Nikkei extended losses to trade 0.3 percent lower, weighed down by a stronger yen.

"Global equities are firmer, but it is not indicative of an uptake in risk appetite. The upmove was mostly driven by higher oil prices," Bernard Aw, market strategist at IG, wrote in a note. "Therefore, Asia may not see much of a risk-on session today, as market participants remain cautious."

Chinese shares also slipped, with the CSI 300 and the Shanghai Composite indices both down 0.7 percent. Hong Kong's Hang Seng slid 0.4 percent.

Chinese dollar-denominated exports declined 4.1 percent in May from a year earlier, compared with the expected drop of 3.6 percent. Imports fell 0.4 percent, less than the expected 6 percent. China's trade surplus is forecast to hit $50 billion in May.

On Wall Street, the U.S. S&P 500 Index rose 0.1 percent to 2,112, less than 20 points away from its record closing high marked in May last year.

The advance was led by 2.1 percent gains in energy shares as oil prices jumped more than 1 percent to hit 2016 highs on expectations of domestic stockpile draws and worries about supply shortfalls from attacks on Nigeria's oil industry.

A report by trade group American Petroleum Institute (API), released after Tuesday's close showed a crude draw of 3.6 million barrels, larger than expectations of 2.7 million barrels, supporting the market.

U.S. crude futures rose 0.1 percent to $50.43 per barrel, near its Tuesday high of $50.53, a level last seen in October.

Global benchmark Brent futures was little changed at $51.47, close to the eight-month high of $51.55 per barrel hit earlier in the session.

Investors further trimmed expectations of Fed rate hikes as they assessed Friday's employment report that showed new hires sharply dropped in May.

Data published on Tuesday confirmed U.S. nonfarm productivity fell in the first quarter on a surge in labor-related costs, suggesting companies may have had to slow hiring after their hiring earlier this year outpaced revenue growth.

"Output is not increasing as much as an increase in employment, hence we have a fall in productivity," said Shuji Shirota, head of macroeconomic strategy at HSBC Securities. "If employment stops increasing and we still have no growth in productivity, that would be a worrying sign."

The 10-year U.S. Treasuries yield was last at 1.7108, after falling back to 1.713 percent overnight, testing strong support at around 1.70 percent.

In Europe, German bond yields hit a record low of 0.045 percent on Tuesday as investors sought a safe haven ahead of Britain's referendum on EU membership.

The British pound was off Monday's three-week low but remained volatile. It traded at $1.4542, compared with Monday's low of $1.4352.

The dollar also licked its wounds near four-week lows after the job data quashed expectations of a Fed rate hike in the next couple of months.

The dollar index stood at 93.732, the lowest level in almost a month.

The euro gained 0.1 percent to $1.13690 while the yen rose 0.6 percent to 106.735 per dollar.

source: www.abs-cbnnews.com

Asia stocks cheered by China trade surprise

SYDNEY - Asian shares made their first real rally of the year on Wednesday after Chinese data trade data beat expectations, offering a rare shaft of light for the global economy.

Japan's Nikkei jumped 2.6 percent from a near-one-year trough, while battered Australian stocks gained 1.3 percent. MSCI's broadest index of Asia-Pacific shares outside Japan sped ahead by 1.6 percent and away from its lowest since late 2011.

Even China's mercurial markets found some relief with the Shanghai Composite Index up 0.8 percent and the CSI300 index 0.9 percent.

The good cheer spread to E-mini futures contracts for the S&P 500 which climbed 0.8 percent.

The gains came after China reported its exports had risen 2.3 percent in yuan-denominated terms in December, from a year earlier while imports dipped 4.0 percent.

In U.S. dollar terms, China's December exports exceeded analyst expectations, falling 1.4 pct from a year earlier, while imports fell by 7.6 percent. Analysts polled by Reuters had expected exports to fall 8.0 percent and imports to fall 11.5 percent.

While investors harbor suspicions about the reliability of the data, on the surface they offered hope that world trade flows were at least stabilizing after a dismal 2015.

It also suggested Beijing might prove successful in its increasingly forceful attempts to stabilize the yuan, so dampening fears of a sustained devaluation.

All of which galvanized currency markets where the Australian dollar, often used as a liquid proxy for the yuan, was up half a U.S. cent at $0.7036.

With safe-haven suddenly out of favor, the Japanese yen and the euro eased broadly. The U.S. dollar moved up to 118.22 yen from an early 117.61, while the euro slipped to $1.0815 from $1.0860.

Against a basket of currencies the dollar gained 0.2 percent.

Likewise, low-risk sovereign debt had to surrender a little of their recent gains and yields on 10-year paper nudged up 3 basis points 2.137 percent.

The hint of firmer demand from China provided a reprieve for commodity prices, which have been under the hammer for months.

U.S. crude edged up 44 cents to $30.88 a barrel a day after diving as deep as $29.93 to break the $20 barrier for the first time in 12 years.

Benchmark Brent was quoted 31 cents higher at $31.17 a barrel. U.S. crude had fallen 17 percent in just seven sessions, a gift to consumers across the globe but also a strong force for disinflation.

source: www.abs-cbnnews.com

China jitters send stocks tumbling

LONDON - World stocks and commodity prices tumbled on Tuesday, as poor Chinese data saw fears about its economic health intensify.

After a relatively upbeat few days for world markets, concerns about China were reignited by surveys that showed its giant manufacturing sector shrinking at its fastest pace in three years and its services sector also cooling.

Asian stocks, particularly in Japan and Australia, had swooned overnight, and the gloomy mood remained in Europe as the pan-regional FTSEurofirst 300 opened down 2.5 percent after its worst month in four years.

London, Frankfurt and Paris were down 2.3 to 2.5 percent and oil was also back in the red as it cut almost $1.5 off the $10 it had leapt between Thursday and Monday, which had been its biggest three-day surge in 25 years.

"The problem is that we have these brief spells of optimism like we had last week when U.S. GDP was revised up, but the overall theme is still the weakness in China and that is very hard to dispel from markets," said Philip Marey, a strategist at Rabobank in the Netherlands.

U.S. stock futures were also down 1.5 percent, while the mood was similarly wary in the currency and bond markets.

The safe-haven Japanese yen and the low-yielding euro, which has also been back in favor following its recent Greece-related falls, both rose against the dollar, to 120.16 yen per dollar and $1.1323 to the euro.

Gold another favorite of investors during periods of uncertainty, was up at $1,141 an ounce having risen 3.5 in August, its best month since January

The head of the International Monetary Fund, Christine Lagarde, summed up the situation saying in a speech in Indonesia that global economic growth was now likely to be weaker than had been expected just a few months ago.

She cited both a slower recovery in major advanced economies and a further slowdown in emerging nations and highlighted the need to "be vigilant for spillovers" from China's stutters.

"The transition (in China) to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy," she added.

CAUTION! FRAGILE CHINA

The latest bout of volatility had been kicked off by losses on Wall Street overnight after comments from Federal Reserve Vice Chairman Stanley Fischer appeared to keep alive the chances of a U.S. interest rate hike in September.

China's official Purchasing Managers' Index (PMI) then compounded matters, falling to 49.7 in August from the previous month's reading of 50.0, its weakest showing in three years.

"Recent volatilities in global financial markets could weigh on the real economy, and a pessimistic outlook may become self-fulfilling," said He Fan, chief economist at Caixin Insight Group. A separate survey from Fan's organization had also shown the country's services sector slowing.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.6 percent to extend the more than 10 percent it had lost in August.

Chinese shares had remained relatively steady, with the Shanghai Composite Index down a modest 1.2 percent and the CSI300 index almost flat.

Instead the pain was felt elsewhere. Japan's Nikkei slumped 3.8 percent after tanking 8.2 percent in August. Australian, Indonesian and Hong Kong stocks were all down by more than 2 percent.

Metals markets were straining again too. London Metal Exchange copper fell 1 percent to $5,087.50 as markets reopened after a long bank holiday weekend, nickel slid 2 percent while aluminum and tin skidded too.

One of the other recent victims of the China jitters, the Australian dollar, edged up however, adding about 0.2 percent to $0.7125 after the Reserve Bank of Australia held Aussie interest rates steady.

source: www.abs-cbnnews.com

Global stocks, dollar rebound but China smashed again

LONDON - Volatile global markets got some respite from the latest blood-letting on Tuesday as bargain hunters nudged up Asian and European stocks, though China, at the center of the rout, was smashed again.

The dollar and oil prices saw their first rises in five days and some of the positions in safe-haven bonds and currencies such as the yen and the euro were also cut as investors nervously dipped their toes back in the still choppy waters.

China's main equity markets had seen another huge 8 percent drop overnight and Japan's Nikkei had slumped 4 percent, but the rest of Asia had been calmer overall.

Europe also started on a firmer footing after Monday's global beating had wiped around 450 billion euros ($520.70 billion) off the value of its leading stock markets.

The pan-European FTSEurofirst 300 index clawed back 1.7 percent of the more than 5 percent it had lost as London, Paris and Frankfurt bounced 1.5-1.7 percent.

"We are seeing signs of relief with European stocks opening higher despite China extending its losses," said Piotr Matys, an emerging markets expert at Rabobank in London.

"We are trying to decouple but I think it's too early to declare the worst is over though and we are out of the woods. The way I see it is that this is a bit of a technical correction after things got a bit oversold."

The currency market was also calmer. The dollar rose against the yen as it pulled out of a four-day long slide that had left it at a seven-month low.

Traders said a rise in U.S. stock index futures and a brief rebound in Japanese stocks had helped spur dollar-buying against the yen earlier in the day, with the dollar rising to 120.11 yen at one point.

German Bund and other euro zone government bond yields also rose along with those on U.S. Treasuries as the previous day's rush for safety eased, although it was far from plain sailing.

Mainland Chinese shares had another calamitous day, with the Shanghai Composite Index falling another 8 percent and breaking below the psychological level of 3,000. The index fell 15 percent the previous three days, including an 8.5 percent collapse on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Oil prices also stabilized, however, after plunging more than 6 percent and hitting 6 1/2-year lows.

U.S. crude futures traded at $38.73 per barrel, up 1.2 percent on the day, while Brent crude futures last stood at $43.03 after having fallen to $42.23 on Monday. Copper nudged up a fraction too to $4,956 a tonne.
source: www.abs-cbnnews.com

Asian shares bounce off 3-year lows while China's suffering goes on

TOKYO - Volatile global markets showed signs of a respite from the recent blood-letting on Tuesday, as bargain hunters helped Asian stocks off three-year lows hit on fears that China's economy was risking a hard landing, with Chinese shares losing another 5 percent.

The MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.7 percent after an initial dip to three-year lows while Japan's Nikkei index also erased most of its early losses after an initial drop of 4.3 percent.

"There appears to be buyback as many markets look oversold after panicky selling in the last few days. Even the shares that had little business ties with China were sold," said Yukino Yamada, senior strategist at Daiwa Securities.

U.S. stock futures also gained 2.0 percent in Asia, paring a part of its 5-percent fall the previous day.

But mainland Chinese shares bucked the trend, with Shanghai Composite Index falling another five percent even after 15 percent fall in the last three days, including 8.5 percent drop on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Underlining concerns about China, Japanese Finance Minister Taro Aso said on Tuesday he hoped China would take action to stabilize its economy and that Tokyo had no plan for now to unveil its own new economic stimulus package.

MSCI's all country world index is up 0.2 percent in Asia after having fallen 3.8 percent on Monday to a 10 1/2-month low, its biggest fall in almost four years.

Global share markets have been hit by worries that the Chinese economy, the most important engine for the world economy, was growing at a much slower pace than Beijing's 7 percent target for 2015.

Investors are also unnerved by uncertainty over U.S. monetary policy. The Federal Reserve has said it plans to raise interest rates this year for the first time in almost a decade.

The heavy fall in share prices worldwide over the past week has sharply reduced expectations of a U.S. rate hike in September, but the outlook is far from clear.

Atlanta Fed President Dennis Lockhart, whose comments earlier this month sparked expectations of a hike in September, said on Monday that the Federal Reserve will likely begin raising rates "sometime this year."

On Wall Street, the S&P 500 Index fell 3.9 percent to a 10-month low on Monday. The CBOE volatility index, a key measure of U.S. equity volatility, shot up to more than 50 percent at one point for the first time since the 2008 global financial crisis.

Because some investors often fund their investment in risk assets by borrowing low-yielding euro and yen, the sell-off in shares helped send both currencies to seven-month highs.

The euro rose as high as $1.1715 while the yen strengthened to 116.15 to the dollar.

But both currencies stepped back in Asia. The euro slipped 0.7 percent to $1.1531 while the yen retreated to 120.02 to the dollar.

Oil prices also stabilized in Asia after having plunged more than 6 percent on Monday to 6 1/2-year lows.

U.S. crude futures traded at $38.73 per barrel, gaining a dollar from Monday's low of $37.75.

Brent crude futures last stood at $43.20 after having fallen to $42.23 on Monday.

Brent still stood not far from $36.20, its low hit in the aftermath of the global financial crisis, having fallen more than 66 percent from last year's peak.

source: www.abs-cbnnews.com

China stocks rebound sharply after Beijing slaps curbs on selling

BEIJING/SHANGHAI - Chinese stocks rebounded around 6 percent on Thursday, as Beijing's increasingly frantic attempts to arrest a sell-off that has roiled global financial markets finally appeared to gain some traction.

In the most drastic step yet to prop up the market, China's securities regulator banned shareholders with large stakes in listed firms from selling. The banking regulator said separately it would allow lenders to roll over loans backed by stocks.

By the close of trading, the CSI300 index of the largest listed companies in Shanghai and Shenzhen had raced up 6.4 percent, while the Shanghai Composite Index bounced 5.8 percent for its biggest daily percentage gain in six years.

China's malfunctioning stock markets remained semi-frozen, however, with the shares of around 1,500 listed companies - or around $2.8 trillion of stock - suspended, and some analysts said it was too early to call the endgame.

"The market sees some positive signs today," said Du Changchun, analyst at Northeast Securities in Shanghai. "But it is far from calling it a victory for the rescuers as more than half of listed companies are not trading."

More than 25 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the financial system is now a bigger risk than the crisis in Greece.

"We are inclined to believe that Beijing will escalate policy responses until they start working," said economists at Credit Suisse in a research note.

"If market conditions do not stabilize, we expect a statement of 'whatever it takes' from the Chinese government, given that social stability is at stake and financial systemic risks are evident."

The United States has voiced worries the stock market crash could get in the way of Beijing's economic reform agenda.

"NATIONAL TEAM"

The plunge in China's previously booming stock markets, which had more than doubled in the year to mid-June, is a major headache for President Xi Jinping and China's top leaders, who are already grappling with slowing growth.

Beijing, which had made handing a larger role to market forces a centerpiece of its economic reforms, has responded with a battery of support measures, including an interest rate cut, suspension of initial public offerings and enlisting brokerages to buy stocks, backed by cash from the central bank.

"The government will be able to stabilize the market because they have a lot of tools in the toolbox," said Christopher Moltke-Leth, head of institutional client trading at Saxo Capital Markets.

"But it is concerning that the Chinese government doesn't allow market forces to work, and that’s something China must change over time."

The Global Times, an influential tabloid published by the Communist Party's official newspaper, invoked the "national team" in an editorial rallying support behind the authorities' efforts to arrest the slide.

"While there are disaster victims everywhere in China’s stock market, the other scene is that the 'national team' is truly taking action," the paper said.

The China Securities Regulatory Commission (CSRC) said on its website late on Wednesday that holders of more than 5 percent of a company's stock would be barred from selling for the next six months.

The CSRC, which warned on Wednesday of "panic sentiment" gripping a market dominated by ordinary retail investors, said it would deal severely with any shareholders who violated the restriction.

The prohibition is unlikely to have much impact on foreign investors. No Qualified Foreign Institutional Investor (QFII), one of the main channels of foreign investment in China, holds more than 5 percent of a Shanghai or Shenzhen listed company. Foreign investors with more than a 5 percent stake in Chinese firms are all strategic investors.

"BIG FIST"

As the daily barrage of official measures to prop up the market continued, the banking and insurance regulators announced a series of moves to ease margin lending requirements and terms on stock-backed loans.

In the latest salvo against short sellers, who bet on falling prices, official news agency Xinhua said police were investigating suspected "malicious" selling of shares. The probe showed that the authorities would "punch back" with a "big fist" against illegal activities, Xinhua said on its microblog.

China's stock market is still smaller than those of many developed countries relative to GDP, and equity financing only accounts for a small portion of companies' capital funding.

"Even if the sell-off in Chinese mainland equities continues for a while, we doubt it will have a major adverse effect on China's economy," David Rees, economist at Capital Economics, wrote in a note.

Nevertheless, commodities that are sensitive to the outlook for the world's second-biggest economy have been hit, with copper prices touching a six-year low on Wednesday and iron ore tumbling to a 10-year low.

source: www.abs-cbnnews.com

China stock market freezing up as sell-off gathers pace

SHANGHAI - China's tumbling stock market showed signs of seizing up on Wednesday, as companies scrambled to escape the rout by having their shares suspended and indexes plunged after the securities regulator warned of "panic sentiment" gripping investors.

Beijing, which has struggled for more than a week to bend the market to its will, unveiled yet another battery of measures to arrest the sell-off, and the People's Bank of China said it would step up support to brokerages enlisted to prop up shares.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index dropped 5.9 percent.

With nearly half the market on a trading halt and another round of margin calls forcing leveraged investors to dump whatever shares could find a buyer, blue chips that had been supported by stabilization funds earlier in the week bore the brunt.

"I've never seen this kind of slump before. I don't think anyone has. Liquidity is totally depleted," said Du Changchun, an analyst at Northeast Securities.

"Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips."

More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.

"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."

Commodities markets reflected growing concerns about the broader health of the world's second largest economy, with copper prices falling to a six-year low, Shanghai nickel futures sliding by their 5 percent daily limit, and oil falling toward $56 a barrel, near a three month-low.

TRADING HALTS

More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhen exchanges on Wednesday, taking total suspensions to about 1,300 - 45 percent of the market or roughly $2.4 trillion worth of stock - as companies scuttled to sit out the carnage.

With so many small-cap companies sheltering on the sidelines, the ChiNext growth board, which has seen some of the biggest swings in valuations, fell a modest 0.8 percent.

The plunge in China's previously booming stock markets, which had more than doubled in the year to mid-June, is a major headache for President Xi Jinping and China's top leaders, who are already grappling with slowing growth.

Beijing's interventionist response has also raised questions about its ability to enact the market liberalization steps that are a centerpiece of its economic reform agenda.

China has orchestrated brokerages and fund managers to promise to buy billions of dollars' worth of stocks, helped by a state-backed margin finance company which the central bank pledged on Wednesday to provide sufficient liquidity.

The securities regulator said the Securities Finance Corp had provided 260 billion yuan ($41.8 billion) to 21 brokerages, though that sum is only 40 percent of the amount of leveraged positions that investors have cut since June 18.

RETAIL INVESTORS

Unlike other major stock markets, which are dominated by professional money managers, retail investors account for around 85 percent of China trade, which exacerbates volatility.

"It's uncommon to see so many shares posting consecutive daily limit falls, and the index futures swinging so wildly," said Wang Feng, CEO and founder of hedge fund firm Alpha Squared Capital Co and a former Wall Street trader.

"It's a stampede. And the problem of the market is that all the players move in the same direction, and are too emotional."

A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other "stability measures" have done little to calm investors.

The barrage of official commentary and new support measures continued throughout Wednesday's trading session, without visible effect.

Deng Ge, a spokesman for the China Securities Regulatory Commission, said in remarks posted on its official channel on Weibo, China's version of Twitter, that there had been a big increase in "irrational selling" of stocks.

Government agencies also announced that insurers would be allowed to by more blue chips and urged major shareholders and top executives to buy their own shares.

But the market sell-off has extended beyond the mainland, with Chinese stocks on U.S. exchanges falling as much as 6.1 percent on Tuesday, according to the Bank of New York Mellon index of such securities.

Hong Kong's Hang Seng Index fell 5.8 percent, with shares of Chinese brokerages taking a heavy beating.

"Investors are extremely unimpressed with their sudden conscription into national service, and you can see that in their share prices," said Matthew Smith, a strategist who covers the China financials sector for Macquarie.

source: www.abs-cbnnews.com