Stocks in Hong Kong and Australia posted solid gains Wednesday as a positive lead from Wall Street helped a rebound from recent losses, but shares traded in Shanghai extended losses on lingering worries about high interbank money market rates.
Australia’s S&P/ASX 200 AU:XJO -0.18% jumped 1.6% after a four-day losing streak, while Taiwan’s Taiex XX:Y9999 +2.26% added 1.6% and South Korea’s Kospi KR:SEU +1.56% edged up 0.2% after each suffered declines in the previous five sessions.
Hong Kong’s Hang Seng Index HK:HSI +1.78% soared 2.4% to 20,338.55, returning back above the 20,000-point level.
DJIA 14,909.60, -114.89, -0.76%
The gains came after stocks on Wall Street ended higher Tuesday to cheer data showing an increase in durable-goods orders, new home sales and consumer confidence, despite the looming prospect that the Federal Reserve may slow its bond purchases if the U.S. economy improves.
The higher finish for the key U.S. equity indexes “suggests that, although the quantitative-easing exit will be rocky, signs the U.S. is standing on its feet will be a chance for optimism rather than cynicism,” said IG Markets strategist Evan Lucas.
On the downside, Japan’s Nikkei Stock Average JP:NIK +3.51% gave up early gains to end the day 1% lower after a roller-coaster ride, as the yen strengthened and concerns over credit conditions in China persisted.
China’s Shanghai Composite Index CN:SHCOMP +1.50% dropped 0.4%, meanwhile, for its 15th decline in 17 sessions. The benchmark index has lost more than 15% of its value just this month. It ended Wednesday’s session just shy of bear market territory, at 19.8% lower than its Feb. 6 high.
The index had on Tuesday tumbled as much as 5.8% before staging a major recovery in late afternoon trade to slash those losses and finish the day just mildly lower.
The Shanghai index’s drop Wednesday came as interbank money market rates in Shanghai remained at elevated levels.
The rate on the seven-day weighted average repurchase agreement eased to 7.17% early on Wednesday from Tuesday’s close at 7.44%, while the overnight repo rate fell to 5.51% from 5.83%, according to a Dow Jones Newswires report.
Both rates, however, remain above the levels seen up until the end of May, even after a People’s Bank of China official said Tuesday the central bank will guide interest rates to a “reasonable range.”
Still, analysts remained confident the high borrowing costs in Chinese interbank markets would decline by mid-July.
“Policy makers appear prepared to inflict pain on banks and accept some growth slowdown to reduce systemic risks. However, they will act to ease the liquidity squeeze before it jeopardizes the annual growth target or threatens systemic stability or survival of a bank,” said Crédit Agricole senior economist Dariusz Kowalczyk.
Several banks traded lower in Shanghai, with Industrial & Commercial Bank of China Ltd. CN:601398 +5.51% IDCBY +1.47% sliding 5.6% as the stock traded without rights to a dividend, while China Minsheng Banking Corp. CN:600016 +4.38% CMAKY -4.40% dropped 1.7%.
Lenders were mostly higher in Hong Kong, however, with the locally listed shares of ICBC HK:1398 +2.73% and China Minsheng HK:1988 -1.56% jumping 6.8% and 6.4%, respectively.
In Japan, shares of several exporters gave up early gains to retreat as the U.S. dollar USDJPY +0.7968% weakened amid losses in Shanghai.
Shares of Fanuc Corp. JP:6954 +2.71% FANUY +0.62% dropped 1.6%, Hitachi Construction Machinery Co. JP:6305 +1.21% HTCMY -4.97% shed 2.1%, and Mazda Motor Corp. JP:7261 +4.55% MZDAF +3.33% fell 1.1%.
Softbank Corp. JP:9984 +2.48% SFTBF -0.43% , which had also jumped earlier in the day on news that Sprint Nextel Corp. S +0.57% shareholders had voted in favor of the company’s takeover offer, retreated in a downbeat market, ended 0.2% lower.
Asian investors are pumping money into U.S. commercial real estate at a record pace, helping to fuel the recovery of property values and funding development in major markets.
But shares of some Japanese banks rose on a Nikkei newspaper report they planned to raise mortgage rates for a third consecutive month in July.
Mitsubishi UFJ Financial Group Inc. JP:8306 +4.08% MTU +2.31% advanced 0.5%, and Sumitomo Mitsui Financial Group Inc. JP:8316 +2.94% SMFG +0.55% gained 0.6%.
Miners rebounded in Sydney, with BHP Billiton Ltd. AU:BHP -0.32% BHP -1.33% rising 2.6%, and Fortescue Metals Group Ltd. AU:FMG -1.94% FSUMF -3.73% climbing 2.4%, although both stocks were off the day’s highs.