By Gregor Stuart Hunter
China's shares fell as much as 5% Tuesday morning, while other
markets in Asia shrugged off concerns about a Greek default.
The Shanghai Composite Index fell as much as 1.5% at the open,
then veered between gains and losses, a day after a selloff that
thrust the benchmark into a bear market, defined as a loss of more
than 20% from its high reached on June 12. The index was last down
4.6%
Chinese authorities have tried to draw a line under the
declines. The central bank cut interest rates over the weekend and
late Monday the Finance Ministry announced that the state's pension
fund could be allowed to invest up to 30% of its net asset value in
securities.
The smaller Shenzhen market fell 6% with the ChiNext board,
which is composed of small-cap companies, down 7.4% after losing
more than a third of its value from its peak earlier this
month.
With investor confidence likely to remain fragile, ING said
investors should watch for weakness in China spilling over into
other markets.
"Controls on capital flows insulate China's financial markets
from contagion due to volatility in global financial markets,"
analysts from ING wrote in a research note. "The controls don't
insulate global financial markets from contagion emanating from
China."
In Hong Kong stocks rebounded, with the Hang Seng Index up 0.4%,
while listings of Chinese companies, known as H-shares, rose
0.7%.
Japan's Nikkei 225 Stock Average rose 0.1% in midmorning trading
while the S&P/ASX 200 index slipped 0.1% as the effects of a
market rout in the U.S., with the S&P 500 sinking 2.1%, seeming
to abate.
"Japan shares are in the unenviable position time-wise to absorb
the Greek news shock first, and then the overseas reaction,
resulting in a 'double-whammy' effect," said Yutaka Miura, a senior
technical analyst at Mizuho Securities.
The euro recovered slightly from a selloff on Monday, rising
0.2% to 1.1197 against the dollar even as Greece looks set to
default on its payment to the International Monetary Fund due
Tuesday. Still, it fell 0.3% against the Japanese yen in early
Asian trade as investors seek safer assets.
The market appears "to be placing its faith in the [European
Central Bank] to 'do whatever it takes' to protect the euro,
whatever the outcome in Greece," says BNZ foreign-exchange
strategist Kymberly Martin.
Rebecca Howard contributed to this article.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com