By Gregor Stuart Hunter
China's shares seesawed in volatile trade on Tuesday, while
markets elsewhere in Asia made modest gains as investors push off
concerns about a default in Greece until the outcome of a
referendum next Sunday.
The Shanghai Composite Index fell as much as 5.1% before
recovering to close the morning session flat. The bumpy trading
comes 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.
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 2.2% after falling more than 6%
earlier Tuesday. The ChiNext board, which is composed of small-cap
companies, fell 0.6%, recovering from earlier losses of 7.6%. The
board has lost 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."
Hong Kong's Hang Seng Index is up 1.2%, while listings of
Chinese companies, known as H-shares, rose 2.1%.
Japan's Nikkei 225 Stock Average rose 0.3% in midmorning trading
while the S&P/ASX 200 index slipped 0.2% as the effects of a
market rout in the U.S., with the S&P 500 sinking 2.1%, seemed
to abate.
"It might be tempting to call today's movement a 'dead-cat
bounce,' in light of the fact that overall 'risk-off' investing
conditions have not changed much," said Yutaka Miura, a senior
technical analyst at Mizuho Securities. "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. But the situation in Europe may not gain any clarity until
Greece holds its referendum this weekend" on whether or not to
accept conditions for another bailout, he said.
The euro recovered slightly from a selloff on Monday, rising
0.2% to 1.1189 against the dollar even as Greece looks set to
default on its payment to the International Monetary Fund due
Tuesday. The currency fell 0.5% against the Japanese yen in Asian
trade as investors seek safer assets.
The Malaysian ringgit hit its weakest level in more than a
decade earlier Tuesday, falling to a fresh low of 3.7855 against
the dollar.
Commodity markets slipped, with gold prices sliding 0.2% to
$1,177.10 per troy ounce, while Brent crude futures decreased 0.1%
to $61.93 per barrel.
Anjani Trivedi, Bradford Frischkorn and Rebecca Howard
contributed to this article.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com