Asian Shares Rise, but Shanghai Composite Closes Slightly Down

27/01/2016 14:09 AST

China's main stock benchmark closed slightly down Wednesday, mostly recovering from steep losses earlier in the volatile session.

The Shanghai Composite Index finished down 0.5% at 2735.56. That was its lowest close since December 2014. It dropped as much as 4% earlier in the session.

It was the second straight day of losses for Shanghai, which plunged 6.4% Tuesday, amid fears of accelerating capital outflows from China as its economy slows and the risk of further yuan depreciation.

On Wednesday, the Shenzhen Composite Index fell by 0.8% and the China's Nasdaq-style ChiNext was down by 0.5%.

Elsewhere in Asia, stock gains picked up as China came off its intraday lows.

Hong Kong's Hang Seng Index was up 1.2%, while Japan's Nikkei Stock Average rose 2.7%. Australia's broader S&P/ASX 200 was down 1.2%, catching up to losses across the region after it reopened following a holiday on Tuesday.

Brent crude oil was last down by 1.9% at $31.17 a barrel.

Energy shares were mixed, down in Australia by 2.3% and up in Hong Kong by 2.9%.

In China, traders and analysts said Beijing appears to be shifting away from propping up the stock markets to focus on keeping the yuan stable and fostering economic growth.

Some investors have been hoping that China would lower the amount of reserves that banks have to hold before the Chinese Lunar New Year starts on Feb. 7. But their expectations are waning.

"In the short term, [China's central bank] will most likely continue to inject liquidity in the system via open market operations instead of [reserve requirement ratio] cuts to avoid pressuring further capital outflow," said Francois Perrin, portfolio manager for East Capital Asia, in a note to his clients.

Still, the mood of investors elsewhere in Asia has improved, reflecting the Dow Jones Industrial Average's rise of 1.8% overnight and a clutch of U.S. companies releasing better-than-expected earnings.

One thing they are looking for later this week is whether the Bank of Japan will signal more monetary easing in coming months. Investor sentiment also has been buoyed by the Chinese yuan, which is continuing to hold steady. The freely traded offshore yuan was last at 6.6117 to one U.S. dollar, roughly unchanged from the previous day.

Dow Jones Newswire