MW : Asian stocks mostly up, mirroring Shanghai rebound
The bounce in Shanghai helped some other major Asian markets to end higher after falling into negative territory during the session. Japanese stocks nudged slightly higher in modest volumes, while Indian stocks jumped in afternoon trading as investors covered their short sales.
"Given how overheated Chinese stocks had been, this correction was inevitable, and some would say it was necessary," Tachibana Securities analyst Kenichi Hirano said.
China's Shanghai Composite ended up 1.4% at 2910.88 a day after it suffered the biggest percentage loss of 2009. It seesawed through the session as analysts remained divided over the future course of the market.
SHCOMP 2,911, +40.25, +1.40%
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"The rally in equity prices has disguised what are still large imbalances in the real economy. And, as equity prices fall, these imbalances will find themselves under more scrutiny, especially after July's economic data disappointed," Royal Bank of Scotland economist Ben Simpfendorfer wrote in a report.
But Jing Ulrich, head of China equities and commodities at J.P. Morgan said that "in the event of further correction, the Chinese authorities will be prepared to put a floor under the stock prices." Beijing may do that by slowing measures to absorb excess liquidity and by eliminating stamp duty on equity transactions, she added.
Stocks which lost heavily in the previous session led Tuesday's rebound, with Yunnan Copper rising 5.6% in Shenzhen and Aluminum Corp. of China (ACH 27.94, -2.20, -7.30%) rising 4.2% in Shanghai.
Steel giant Baoshan Iron & Steel gained 3% after Nomura International upgraded the stock to buy from neutral, citing a better operating outlook.
Elsewhere in Asia, Japan's Nikkei 225 Average gained 0.2%, Hong Kong's Hang Seng Index advanced 0.8%, Australia's S&P/ASX 200 slipped 0.2%, Taiwan's Taiex stumbled 2.1%, South Korea's Kospi inched up 0.2% and New Zealand's NZX 50 slid 0.5%.
"A pause equals taking profits. The trading world is rightly locking in some of the outperformance of [assets associated with] risk and I expect this not to be a one-day event. This may well go on for weeks, yet I don't expect Wall Street down 2.0% every night," said Southern Cross Equities director Charlie Aitken.
Regional markets
In afternoon trading, India's Sensex rose 1.6% and Singapore's Straits Times Index climbed 0.4%.
Dow Jones Industrial Average (INDU 9,135, -186.06, -1.10%) futures were recently up 48 points in screen trading, after dropping 186 points Monday.
Airline shares were in the spotlight in China and Hong Kong after Air China (AIRYY 11.37, -0.33, -2.82%) (HK:753 4.48, -0.09, -1.97%) increased its stake in Cathay Pacific Airways (CPCA.Y 7.37, -0.15, -1.99%) (HK:293 11.78, +0.16, +1.38%) . Air China fell 2.4% in Shanghai and 2% in Hong Kong, with Cathay stock rising 1.4% in Hong Kong. Shares of Citic Pacific (HK:267 22.55, -0.30, -1.31%) (CTPCY 15.00, +0.35, +2.39%) , which agreed to sell a 12.5% stake in Cathay to Air China, dropped 1.3%.
Metals and energy stocks began the day on a generally weak note after a sharp retreat in commodities prices Monday. But they pared losses as a weakened U.S. helped a rebound in crude-oil and gold prices.
Shares of BHP Billiton (BHP 60.20, -2.75, -4.37%) (AU:BHP 37.26, +0.13, +0.35%) rose 0.4% while Rio Tinto (RTP 148.40, -9.89, -6.25%) (AU:RIO 56.90, -0.20, -0.35%) shed 0.4% in Sydney, Inpex (JP:1605 708,000, -36,000, -4.84%) fell 0.4% in Tokyo and Cnooc (CEO 128.30, -6.48, -4.81%) (HK:883 10.24, +0.02, +0.20%) ended flat in Hong Kong.
"People still doubt the pace of the economic recovery. But we have witnessed positive earnings results and some economic data indicating a faster-than-expected economic recovery, so stocks will come back and rise after a cooling-down period," said You Seung-min at Samsung Securities in Seoul.
Nymex light, sweet crude oil for September delivery was recently up 68 cents at $67.43 on Globex, after losing 76 cents on New York Mercantile Exchange overnight. Spot gold was trading at $938.60 a troy ounce, up $5.40 since the New York close.
In Australia, shares retraced some losses, even briefly turning positive, after minutes from the central bank's August policy meeting showed the board agreed the economic outlook had improved and laid out details of how the central bank will judge when to tighten policy.
Shares of James Hardie (JHX 24.15, +1.05, +4.55%) (AU:JHX 7.07, +1.29, +22.32%) surged 22.3% after the company said its U.S. operations turned in a strong fiscal first-quarter result and it expected the operations would continue to perform well, guiding for full-year operating profits to come in at the top end of analysts' expectations.
In foreign exchange markets, the yen was weaker against major currencies suggesting an improvement in risk appetite. The U.S. dollar was at 95.22 yen from 94.44 yen late in New York trade on Monday. The euro was regaining lost ground at 134.38 yen from 133.06 yen, and at $1.4109 from $1.4085.
