By Chao Deng
Signs of government support lifted Chinese shares, while other stock markets in Asia slid and haven assets rallied after North Korea said it successfully staged its first test of a more powerful form of nuclear weapon.
The Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP +0.16% rose 2.3% after losing more than 7% in the past two days. Volatility on the benchmark roiled global markets Monday, amid worries about a weakening Chinese economy, a weakening yuan and the prospect that big Chinese stakeholders could start selling their shares.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.76% lost 1% as the Japanese yen /zigman2/quotes/210561789/realtime/sampled USDJPY -0.1700% reached a near three-month high against the U.S. dollar as investors rushed to assets perceived to be safe. The yen’s strength diminishes the value of profits repatriated from abroad.
Traders and analysts suspect China’s so-called “National Team” — state-owned funds tasked with supporting the market — likely bought shares on Tuesday, sending the signal that they were ready to step in should losses deepen. The stock regulator also signaled Tuesday that it would regulate selling among big shareholders, which had been banned from unloading shares since the summer stock rout. Both prospects encouraged buyers to pile in on Wednesday.
Analysts said they interpreted China’s stock regulator’s comments to mean authorities won’t allow aggressive selling and were ready to step in should such moves destabilize the market. The six-month ban on selling by large stakeholders, originally expected to expire Friday, could remain in place until the securities regulator works out new rules to ensure any selling will proceed in an orderly way, according to officials close to the agency.
Expectations that regulators will ramp up intervention could mean that, in the near term, Chinese markets will remain “volatile on a daily basis,” said David Millhouse, head of China research at Forsyth Barr Asia.
Millhouse also noted strong performance in Chinese resources and material stocks after Premier Li Keqiang made a surprise visit to a coal mine Tuesday and said that China will look at measures to reduce oversupply, while helping laid-off workers find new jobs.
In Shanghai, China Shenhua Energy Co. /zigman2/quotes/202621923/delayed CN:601088 -0.92% rose 9.9% and China Petroleum & Chemical Corp. /zigman2/quotes/207158391/delayed CN:600028 -0.41% gained 3.4%. China Railway Construction Corp. /zigman2/quotes/202453937/delayed CN:601186 +2.34% gained 3.2%.
North Korea’s announcement that it detonated a hydrogen bomb earlier Wednesday unnerved investors elsewhere in the region, as the move magnifies the U.S.’s foreign-policy challenges and complicates China’s relationship with its volatile ally.
North Korea announces successful hydrogen bomb test
North Korean state media announced that the country carried out a successful test of a thermonuclear weapon on Wednesday. A few hours earlier, an earthquake was recorded near the site of previous North Korean nuclear tests.
The dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.1700% fell to as low as ¥118.35, its weakest against the yen since Oct. 15, before stabilizing at ¥118.49. It traded at ¥119.03 late Tuesday in New York.
Meanwhile, the South Korea’s won /zigman2/quotes/210561437/realtime/sampled KRWUSD -0.0128% reached its weakest level since September, last at 1,199.11 won to the dollar compared with 1,189.81 late Tuesday in Asia.
In China, the gap between the onshore yuan and the offshore yuan, which trades freely, reached its widest since 2010, when the offshore yuan started trading.
Authorities guided the onshore yuan weaker through its daily fixing, the level around which regulators permit the yuan to trade. The currency last traded at 6.5580 to the dollar, a fresh five year low compared with 6.5157 Tuesday.
The offshore yuan fell to 6.7068 against the U.S. dollar, also a fresh low since 2011.
In corporate news, shares of Asian iPhone suppliers fell after Apple Inc. /zigman2/quotes/202934861/composite AAPL +0.96% announced a potential production cut, with Hon Hai Precision Industry Co. /zigman2/quotes/207256514/delayed TW:2317 -0.45% down 0.1% in Taiwan. The country’s Taiex stock benchmark declined 1.1% to 7990.39, its lowest close since August 2013.
In Hong Kong, mobile lens maker Largan Precision Co. plunged 7.1%.
Shares of China Vanke Co. /zigman2/quotes/203851375/delayed HK:2202 +0.36% fell 9.2%, when the stock resumed trading after being suspended since Dec. 18. The firm, China’s largest property developer, has been trying to fight off a hostile takeover by striking a deal to potentially issue new shares. It said in a statement Tuesday that it made some progress on the planned restructuring without giving further details.