By Gregor Stuart Hunter
China's shares reversed a recent sharp selloff, as investors
elsewhere in Asia push off concerns about a default in Greece until
the outcome of a referendum next Sunday.
The Shanghai Composite Index closed up 5.5%, after falling more
than 5% earlier. Tuesday's moves pull the benchmark from losses on
Monday that ended in bear-market territory, defined as a fall of
20% from a high.
Chinese authorities have tried to draw a line under the
declines, efforts that could be starting to restore investors'
confidence. 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 rose 4.8% after falling more than 6%
earlier Tuesday. The ChiNext board, which is composed of small-cap
companies, is up 6.3%, recovering from losses as steep as 7.6%
earlier. The board has lost more than a quarter 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."
Elsewhere, the effects of a market rout sparked by concerns
about Greece seemed to abate.
Hong Kong's Hang Seng Index is up 1.4%, while listings of
Chinese companies, known as H-shares, rose 2.7%.
Japan's Nikkei 225 Stock Average rose 0.6% while the S&P/ASX
200 index ended up 0.7%.
"It might be tempting to call today's movement [in Japan] 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 is continuing its slide against the
dollar, hitting its weakest level in more than a decade earlier
Tuesday. The ringgit is down 8.3% against the dollar since the
start of the year, making it Asia's worst-performing currency.
Commodity markets also slipped, with gold prices down 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