By Chao Deng
Asia shares were mostly down Friday, tracking losses on Wall
Street overnight, although a rebound in China has been
steadying.
The Nikkei Stock Average was down 0.4%, South Korea's Kospi fell
0.7% and Australia's S&P ASX 200 was flat.
Overnight, U.S. stocks slid in the wake of disappointing
earnings and outlooks from 3M Co. and Caterpillar Inc.
"Earnings growth is more of a problem for the U.S. than Japan,
but the run up in Japanese shares this year (more than 18.5%
year-to-date for the Nikkei) makes it clear that projected earnings
on the Japan side may not be able to sustain much higher stock
prices," said Barclays chief Japan equity strategist Hajime
Kitano.
"Given annual earnings growth in the low- to midteens, the
Nikkei may very well trade largely flat for the remainder of the
year," he added.
The Japanese yen was last at Yen123.85 against the U.S. dollar,
from Yen123.91 late yesterday in New York.
Gold made a slightly gain overnight, after 10 straight days of
losses, as a slightly weaker dollar lured buyers back into the
market. The most actively traded contract, for August delivery rose
$2.60, or 0.2%, to settle at $1,094.10 a troy ounce on the Comex
division of the New York Mercantile Exchange Gold had fallen to a
five-year low on Wednesday.
Oil prices sank into a bear market Thursday in the U.S. as a
global glut of crude shows little sign of abating. Brent crude
futures are up 31 cents at $55.58 a barrel early in Asia, after
settling at to $55.27, its lowest level since April 2.
In China, the Shanghai Composite rose for the sixth consecutive
session Thursday as Beijing-backed funds and buying by large
shareholders appeared to support the market's rebound, according to
analysts.
The Shanghai Composite, still down about a fifth from its June
highs, would still need to rise roughly 9% before reaching 4500.
Brokerages are expected to continue buying the market as long as it
stays below that level.
David Welch, managing director at Reorient Financial, says that
local analysts estimate state-backed China Securities Financial
Corp. has spent roughly one trillion yuan ($160.9 billion) out of
an estimated two trillion credit line, to support the market.
China Securities Regulatory Commission said during the stock
rout earlier this month that the central bank would inject capital
into state-owned CSF Corp. to expand brokerages' business of
financing investors' stock purchases. The securities commission
said later that CSF Corp. was extending a 260 billion yuan ($42
billion) credit line to 21 securities firms to buy stocks.
Authorities haven't disclosed the total amount that CSF is
spending to buy equities.
One bright spot is that major shareholders appear to be buy
rather than just holding on to shares. Earlier this month,
regulators had blocked shareholders and company executives with
stakes of more than 5% from selling shares for six months.
But worries remain. The government has said it is moving to
clamp down on gray-market margin financing, which could push down
the market. Analysts have estimated that hundreds of billions of
yuan from unofficial margin lenders helped fuel that yearlong rally
to mid-June.
Official margin lending provided by Chinese brokerages stood at
1.5 trillion yuan as of yesterday, down 36% from a record 2.3
trillion on June 18, according to Wind.
Mr. Welch added that if the index retraces 50% of its selloff,
it would rise to roughly 4276 by the end of the month.
Write to Chao Deng at Chao.Deng@wsj.com
Access Investor Kit for Caterpillar, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1491231015
Access Investor Kit for 3M Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US88579Y1010