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(THE STRAITS TIMES)China's efforts to restore calm to its turbulent markets showed early signs of success as the yuan stabilized and regional equities rallied for the first time in five days. US treasuries and the yen fell as demand for havens eased.
The Shanghai Composite Index gained 1.6 per cent at 11:13 am local time after the securities regulator suspended a controversial circuit-breaker system, while Asia's benchmark share index pared its biggest weekly drop since 2011. The yuan rose 0.1 per cent in onshore trading after the central bank ended an eight-day stretch of setting weaker reference rates.
Singapore's Straits Times Index reversed an opening drop of more than 1 per cent to trade 1.1 per cent higher at 2,7609 as at 11:39 am.
Japan's Topix index gained 0.3 per cent, reversing an earlier loss of as much as 1.2 per cent. Australia's S&P/ASX 200 Index slid 0.6 per cent and New Zealand's S&P/NZX 50 Index fell 1.1 per cent. South Korea's Kospi index slipped 0.1 per cent.
The Hang Seng Index rose 0.9 per cent, paring its decline for the week to 6.3 pe rcent, and the Hang Seng China Enterprises Index of mainland firms trading in Hong Kong climbed 1.3 perc ent.
Global shares have lost more than US$4 trillion this year as renewed volatility in Chinese markets revived concerns over the ruling Communist Party's ability to manage the world's second- largest economy. The tumult has heightened worries over competitive devaluations and disinflation as emerging-market currencies tumbled with commodities. Investors will shift their attention to America's economy on Friday as the government reports monthly payroll figures, a key variable for US interest rates.
China abandoned its circuit breaker after analysts blamed the new mechanism for exacerbating declines in share prices this week. Mainland exchanges shut early on Thursday and Monday after plunges of 7 per cent in the CSI 300 triggered automatic halts.
The People's Bank of China set the yuan's daily fixing, which restricts onshore moves to a maximum 2 per cent on either side, at 6.5636 per dollar, or 0.02 per cent stronger than Thursday's rate. That's 0.5 per cent higher than Thursday's onshore effective closing price in the spot market and ends an eight-day reduction of 1.42 per cent.
"There was a bit of relief because the fixing was little changed, but it's not fundamental," said Thebes Lo, vice president at Kim Eng Securities Ltd. in Hong Kong. "After such a big correction in global equities, some hedge funds are taking profits off the table first. Given the deteriorating economy in China, the government do not want to risk any social unrest so they're trying to comfort investors as much as they can in the near term."
