HONG KONG, Aug 20 — Chinese shares clawed back up today after a two-week sell-off, giving a boost to Asian stock indexes and commodities, but many investors were nervous that the Shanghai slide may have more room to run.
The benchmark Shanghai Composite Index was up 1.5 per cent, helped by reports that the stock regulator had approved new mutual funds this week to help underpin the market that has slid nearly 20 per cent since hitting a 14-month high earlier in the month.
But Chinese shares surrendered some gains after jumping nearly 3 per cent at one point, showing that the market remains highly volatile.
The gains helped give a lift to other regional shares that have been battered by sudden slumps in Shanghai this month.
Japan's Nikkei average was up 0.7 per cent, while the MSCI benchmark of Asia-Pacific shares outside Japan gained 1 per cent.
Shanghai's impact on global markets has surprised analysts but has been taken by some as a worrying sign about the outlook for the Chinese economy, which has been among the strongest to power out of the worst global downturn in decades.
Patrick Bennett, Asia FX and rates strategist at Societe Generale, said the fact that Chinese shares were having such a big influence on other markets felt like "intellectual piracy", but showed how edgy investors are on the global outlook.
"That such is occurring does tell us of the fragility of risk sentiment," Bennett said in a note to clients.
Gains in higher-yielding currencies were limited on worries that the volatile Chinese market, which is still up 55 per cent so far this year, was suffering a sharp bout of profit-taking that would resume before long.
The Australian dollar was steady at US$0.8295 despite the broad gains in stocks after having taken a hit from the sharp drop in Shanghai shares.
The US dollar edged up after sliding the previous day. The dollar index, a gauge of the greenback's performance against six major currencies, was up 0.2 per cent at 78.589
Oil prices dipped 21 cents a barrel to US$72.21 after having surged more than 4 per cent yesterday on data showing a sharp plunge in US crude stockpiles, a jump that spilled over into shares of energy companies and helped push the Dow Jones industrial average up 0.7 per cent.
Shares of Japanese oil and gas field developer Inpex were up 2.4 per cent.
Safe-haven government bonds slipped as stocks attempted to stage a recovery.
Japanese government bond futures dipped 0.08 point to 138.79 after having pushed up to a five-month high in early trade. The five-year JGB yield edged up a basis point to 0.6550 per cent after touching a four-year low the previous day. — Reuters
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