China shares end mixed after roller coaster session

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China's shares took a wild ride Tuesday, darting between gains and losses before closing mixed, following a sharp selloff in the previous session, while other Asia markets retraced some declines.

In volatile trade, the Shanghai Composite closed down 8.55 points, or 0.26 percent, at 3,287.7 after rising as much as 0.95 percent and falling as much as 3.2 percent earlier in the session. The smaller Shenzhen Composite finished down 39.38 points, or 1.86 percent, at 2,079.77, while the CSI300 erased losses to end up 9.71 points, or 0.28 percent, at 3,478.78 after falling as much as 2.65 percent intraday.

In Hong Kong, the Hang Seng Index erased mid-morning gains to close down 0.65 percent.

In Monday's trading session, Chinese equities plunged after feeble manufacturing surveys revived concerns over the country's economic slowdown. The CSI300 dipped 7 percent in afternoon trade Monday, resulting in trade being suspended for the day. The Shanghai Composite had tumbled 6.8 percent and the Shenzhen Composite plummeted 8.1 percent Monday.

Goldman Sachs said in a note Tuesday that other factors cited as explanations for the sell-off include market concerns over near-term liquidity, capital outflows, monetary tightening and policy stimulus inaction.

During yesterday's sell-off, China tested out its new system-wide circuit breakers linked to the benchmark CSI300 index, dominated by large-cap stocks. When there is a 5 percent move in either direction in the CSI300 index, trading is halted for 15 minutes. When that index moves 7 percent, the market closes for the day. Hong Kong does not have a circuit breaker.

Deutsche Bank said in a note Monday that the top 50 largest weighted constituents on the CSI300, which are mostly financials, property, and industrial names, accounted for 42 percent of the 7 percent loss yesterday. They are, the note suggested, more sensitive to macroeconomic developments and policy dynamics, and hence, "macro conditions and policymakers could have a greater influence on market trading."

The bank also noted that the 5 percent/7 percent stop-trading threshold in China is comparatively lower than other markets, adding to volatility and possibly heightening concerns on market liquidity. In the U.S., if the S&P 500 moves reach 7 and 13 percent, trade is halted for 15 minutes and is then completely stopped when it hits the 20 percent mark in either direction.

Reuters reported that China's securities watchdog, the China Securities Regulatory Commission, said Tuesday that it would continue to hone its circuit-breaker mechanism, but that its use on Monday had helped calm markets and protect investors' interests. This was at odds with the views of market commentators, who blamed the circuit breaker for exacerbating panic selling by retail investors.

Before trading started, the People's Bank of China set Tuesday's yuan fix at 6.5169 against the dollar, compared with Monday's fix of 6.5032, representing a 0.21 percent increase.

Other Asian equities ended Tuesday mixed. The Australian ASX 200 index closed down 86.075 points, or 1.63 percent, at 5,184.40, with an overall poor performance across all sectors. Energy and healthcare sectors were the big losers, down over 2 percent each, while financials lost 1.43 percent.

Angus Nicholson, market analyst at spreadbetter IG, said the ASX was playing catch up to Monday's major global sell-off. "Considering [the ASX] managed to hold up far better than most markets yesterday, its underperformance compared to the rest of Asia today was not overly surprising," he said in an afternoon note.

"The concerns China sparked yesterday, with its PMI miss and market selloff, hit commodities fairly hard overnight, setting up a fairly poor performance for both the materials and energy sectors. The only exceptions to the rule were gold mining stocks, which rallied on safe-haven buying for gold," Nicholson added.

Resource plays remained under pressure, with shares of Rio Tinto and BHP Billiton closing down over 1 percent each. Other miners also ended the session lower. Energy stocks saw losses between 2.57 and 3.85 percent as a result of lower oil prices, while gold miners finished mostly up, with Newcrest tacking on a 1.91 percent gain.

Oil prices saw some uptick during Asian trade with the U.S. West Texas Intermediate (WTI) futures up 14 cents at $36.90 a barrel. The global benchmark Brent was up 12 cents at $37.34 a barrel. In U.S trading hours, U.S. crude was at $36.76 a barrel and Brent at $37.24 a barrel.

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%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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Electronics retailer Dick Smith, which had asked for a trading halt Monday, announced it had appointed voluntary administrators after it was unable to secure short-term funding. Its stock was de-listed only two years after it made its debut on the Australian stock exchange.

Meanwhile, the Australian dollar traded modestly higher at 0.7197 against the U.S. dollar.

In Japan, markets weaved in and out of positive and negative territory before finally closing in the red. The Nikkei 225 was down 76.98 points, or 0.42 percent, at 18,374.

Japanese blue chip stocks traded mostly lower, with the likes of Toyota and Honda closing down more than 1.5 percent each. The dollar-yen pair, which fell below the 120-benchmark against the dollar in the previous session, was at 119.41 on Tuesday afternoon, with the Japanese currency likely boosted by safe-haven flows.

In South Korea, the Kospi finished up 11.77 points, or 0.61 percent, at 1,930.53.

Samsung Electronics shares erased losses to end up 0.25 percent at the end of the session. In the previous trading session, the share was down over 4 percent after the company's chief executive, Kwon Oh-hyun, warned employees of challenging conditions ahead, due to low global growth and greater competition. Samsung is expected to issue earnings guidance for the fourth quarter ended December on Friday.

In Singapore, CapitaLand shares traded down 0.3 percent.

Arthur Lang, CapitaLand chief financial officer, noted that the company, which has around 50 percent of its assets in China, had guided that it expected 14 billion yuan in residential sales on the mainland in 2015. While he told CNBC he couldn't provide the exact figure as full-year results weren't released yet, "if we achieve the guided 14 billion yuan, it would be the highest ever we've achieved in our 14 years there."

Elsewhere, low-cost carrier Tiger Airways saw its shares up 10.98 percent after reports said Singapore Airlines was revising its initial offer price for the airline from an initial S$0.41 a share to S$0.45 a share. Singapore Airlines shares traded up 0.27 percent.

Overnight, U.S. and European equity markets were also hammered on renewed concerns of a global economic slowdown and increased tensions in the Middle East. The drop in Chinese stocks also put pressure on sentiment.

The Dow Jones Industrial Average closed 276 points, or 1.5 percent, lower at 17,148.94, while the S&P 500 shed 31.28 points, or 1.5 percent, at 2,012.66. The Nasdaq Composite was down 104.32 points, or 2 percent, at 4,903.09. The Dow had been down more than 2.5 percent in intraday trade before recovering.

In Europe, major markets all ended more than 2 percent down.

No major economic data is due Asia Pacific today.

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