By Gregor Stuart Hunter
Chinese shares rose early Monday, after Beijing cranked up
efforts over the weekend to stem a three-week selloff that has
wiped out about $2.4 trillion in value.
The Shanghai Composite is up 4% after gaining as much as 7.8% at
the open. The smaller Shenzhen market is up 3.2% and the ChiNext
board, composed of small-cap stocks, is up 3.7%. All indexes still
are off more than a quarter from highs reached in June.
Chinese officials have turned to an array of tools to prop up
the market in recent days: from encouraging stock buying with
borrowed money to rallying state-affiliated firms to invest. Now,
China's central bank indirectly will help investors borrow to buy
shares and regulators over the weekend also agreed to halt all new
initial public offerings.
Late Sunday, the top securities regulator said the People's Bank
of China would "provide liquidity assistance" to China Securities
Finance Corp., a company owned by the stock regulator. The company
will use the money to lend to brokerages, which could then make
loans to investors to buy stocks. It marks the first time
central-bank funds will be directed to institutions other than
banks.
Earlier in the weekend, China's big state-controlled securities
firms, mutual funds and a unit of China's giant sovereign-wealth
fund also pledged to buy shares. The Securities Association said
that 21 brokerages pledged to try to increase investments in the
stock market as long as the Shanghai Composite Index stays below
4,500.
Some brokerages are hopeful: Regulators have more options at
hand to stabilize the Chinese market, and the unwinding of margin
positions could encourage more risk taking in future, said
HSBC.
"The regulator is committed to prevent further A-share sharp
falls. And more favorable policies are expected to be rolled out to
stabilize the market if volatility remains high," analysts from the
bank wrote in a research report. "We estimate that the worst of
deleveraging and forced selling in the A-share market could be
behind us."
Moreover, a big source of liquidity hasn't yet been tapped for
stock investments, said analysts at Bernstein Research. Liquidity
from wealth-management products and money-market funds, rather than
bank deposits, drove much of the earlier rally. "This is good news
for the broader market, as the equity market rally has yet to tap
into the largest liquidity pool in the system, i.e. bank deposits,
so future liquidity supply is not yet a constraint," they say.
Hong Kong's Hang Seng Index fell 0.9% and a gauge of Hong
Kong-listed Chinese companies, known as H-shares, is down 0.7%.
In Malaysia, the attorney general said an official investigation
into a troubled state investment fund has uncovered documents
related to allegations that money was transferred into the personal
bank accounts of Prime Minister Najib Razak. The Wall Street
Journal reported on Friday that Malaysian government investigators
looking into the activities of 1Malaysia Development Bhd., or 1MDB,
had traced almost $700 million in deposits into what they believe
are Mr. Najib's personal accounts. Earlier Monday, the ringgit fell
0.6% against the dollar to 3.8125, crossing the 3.8000 mark for the
first time since the currency's peg against the greenback at that
level was removed in 2005.
Elsewhere in Asia, shares are down after preliminary results of
Greece's referendum Sunday show a victory for the "no" campaign,
which rejected austerity policies set out by the eurozone and the
International Monetary Fund. Creditors have said the outcome
imperils future compromise and puts Greece closer to leaving the
currency bloc.
"The negative vote was not entirely unexpected, but it sends
Greece's trajectory closer to a eurozone exit, which would be
unprecedented," says Rakuten Securities senior market analyst
Masayuki Doshida.
Japan's Nikkei 225 Stock Average shed 1.3% in early trading
while Australia's S&P/ASX 200 was down 1.6%. South Korea's
Kospi was down 0.9%.
"Much of the trauma generated by Greece's situation was priced
into the market last Monday," says Kenichi Hirano, CEO at
Tokyo-based K Asset Management, referring to the day the Nikkei
suffered its second-worst percentage fall of the year. "The impact
on Japan should be more limited this time.
The euro sank 0.9% to $1.1017 against the U.S. dollar and fell
1.1% against the Japanese yen as investors sought safer assets. The
yen also rose 0.3% against the dollar. Gold prices rose 0.8% to
$1,172.20 per troy ounce, while Brent crude futures dropped 1.1% to
$59.69.
Bradford Frischkorn and Grace Zhu contributed to this
article.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com