By Gregor Stuart Hunter
Chinese shares rose Monday as Beijing cranks up efforts to stem
a three-week selloff, while shares elsewhere in Asia fell after
Greeks voted to reject terms of a bailout.
China's indexes are cooling off after an initial spike earlier
Monday. The Shanghai Composite is up 2.2%, off its 7.8% rise at the
open. The smaller Shenzhen market is down 2.6% and the ChiNext
board, composed of small-cap stocks, is down 4% after rising as
much as 7.3% earlier. All indexes still are off more than a quarter
from highs reached in June.
Hong Kong's Hang Seng Index fell 3.2%, while a gauge of Hong
Kong-listed Chinese companies, known as H-shares, is down 3.3%.
Chinese officials have turned to an array of tools to prop up
the market in recent days: from encouraging stock buying with
borrowed money to rallying state-affiliated firms to invest. Now,
China's central bank indirectly will help investors borrow to buy
shares and regulators over the weekend also agreed to halt all new
initial public offerings.
"The intervention of [the People's Bank of China] is
unprecedented," said Li Bin, a Shanghai-based analyst at Capital
Securities, and shows "the government is highly concerned about
potential market stampede caused by margin calls." While margin
trading can amplify returns on the upswing, losses can pile up
quickly when investors are forced to sell holdings to pay back
brokerages from whom they have borrowed.
Some say the measures won't have much staying power. "These
policies are aimed at stabilizing market confidence for the
short-term, but still fall short of expectation to push the market
to a higher level, said Jacky Zhang, an analyst at BOC
International. "Investors may remain cautious about long-term
investment."
Other brokerages are more hopeful. Regulators have more options
at hand to stabilize the Chinese market, and the unwinding of
margin positions could encourage more risk taking in the future,
said HSBC.
Regulators are "committed" to preventing further falls in
mainland A-shares, and "more favorable policies are expected to be
rolled out to stabilize the market if volatility remains high,"
analysts from the bank wrote in a research report. "We estimate
that the worst of deleveraging and forced selling in the A-share
market could be behind us."
Moreover, a big source of liquidity hasn't yet been tapped for
stock investments, said analysts at Bernstein Research. Liquidity
from wealth-management products and money-market funds, rather than
bank deposits, drove much of the earlier rally. "This is good news
for the broader market, as the equity market rally has yet to tap
into the largest liquidity pool in the system, i.e. bank deposits,
so future liquidity supply is not yet a constraint," they say.
Late Sunday, the top securities regulator said the People's Bank
of China would "provide liquidity assistance" to China Securities
Finance Corp., a company owned by the stock regulator. The company
will use the money to lend to brokerages, which could then make
loans to investors to buy stocks. It marks the first time
central-bank funds will be directed to institutions other than
banks.
Earlier in the weekend, China's big state-controlled securities
firms, mutual funds and a unit of China's giant sovereign-wealth
fund also pledged to buy shares. The Securities Association said
that 21 brokerages pledged to try to increase investments in the
stock market as long as the Shanghai Composite Index stays below
4,500.
In Malaysia, the attorney general said an official investigation
into a troubled state investment fund has uncovered documents
related to allegations that money was transferred into the personal
bank accounts of Prime Minister Najib Razak. The Wall Street
Journal reported on Friday that Malaysian government investigators
looking into the activities of 1Malaysia Development Bhd., or 1MDB,
had traced almost $700 million in deposits into what they believe
are Mr. Najib's personal accounts. The ringgit hit 3.8080 on
Monday, its weakest level against the U.S. dollar since September
1998.
Elsewhere in Asia, shares are down after preliminary results of
Greece's referendum Sunday show a victory for the "no" campaign,
which rejected austerity policies set out by the eurozone and the
International Monetary Fund. Creditors have said the outcome
imperils future compromise and puts Greece closer to leaving the
currency bloc.
Japan's Nikkei 225 Stock Average shed 2.1% while Australia's
S&P/ASX 200 was down 1.3%. South Korea's Kospi was down
1.8%.
The euro sank 0.7% to $1.1039 against the U.S. dollar and fell
1% against the Japanese yen as investors sought safer assets. The
yen also rose 0.7% against the dollar. Gold prices rose 0.3% to
$1,176.40 per troy ounce, while Brent crude futures dropped 1.2% to
$59.62.
Yifan Xie, Bradford Frischkorn and Grace Zhu contributed to this
article.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com