Investor Alert

Sept. 23, 2009, 6:59 a.m. EDT

Shanghai drops 1.9%; Sydney bucks weaker trend, up 1.5%

By V. Phani Kumar and Matthew Allen

HONG KONG (MarketWatch) -- Most Asian stock markets ended lower Wednesday, with liquidity concerns weighing on Chinese equities while resource shares got a boost as the falling U.S. dollar buttressed commodity prices.

The Shanghai Composite lost 1.9% to close at 2,842.72 on worries that a likely surge in new-share issues and prospects for lower bank lending in the remainder of the year will crimp liquidity.

Still, some analysts said they were confident that the government would step in to support the market if any correction went too far. Peter Lai, director at DBS Vickers, said that although Beijing wants to avoid asset bubbles, it doesn't want to "kill the market."

"If the Shanghai Composite went below 2,500, it's very likely that you would see some kind of liquidity-easing measures," he said.

Tracking the weakness in Shanghai, Hong Kong's Hang Seng Index (HONG:HK:HSI) fell 0.5% and Taiwan's Taiex gave up 1.2%. South Korea's Kospi dropped 0.4% and India's Sensex slipped 0.1% in afternoon dealings.

/zigman2/quotes/210598030/delayed HSI 19,252.00, +152.72, +0.80%

Markets in Japan were closed for Autumnal Equinox Day, while Indonesia and Pakistan remained shuttered for religious holidays.

In the Philippines, shares ended up 2.1% earlier in the day, while more recently, Singapore's Straits Times Index trading flat as Thailand's SET Index added 0.5%.

On Wall Street, stock-index futures pointed to a flat open as investors awaited a decision from the Federal Reserve on U.S. interest rates. See Indications.

In Australia, stocks snapped a three-session losing streak and raced to their best finish in nearly a year on a strong rebound in banking and mining shares. Sydney's S&P/ASX 200 rose 1.5% -- more than it lost in the previous three sessions.

"I think the bears are getting extraordinarily frustrated, so up days are tending to be more exaggerated than down days," said Macquarie Private Wealth associate director David Halliday in Sydney. "It's hard to see anything in the short term that could derail the market."

Shares of Woodside Petroleum surged 5.1%, while mining giants Rio Tinto (ASX:AU:RIO) and BHP Billiton (ASX:AU:BHP) (NYS:BHP) rose by 2.3% and 0.9%, respectively. The two miners have also been benefiting from target-price and profit-forecast upgrades from Citigroup, which raised its coking coal price forecast for next year to $200 per metric ton from a prior projection of $140 per ton.

Elsewhere, shares of Aluminum Corp. of China (HKG:HK:2600) rose 0.5%, Sino Gold Mining (HKG:HK:1862) added 0.3% and PetroChina Co. (HKG:HK:857) added 0.1% in Hong Kong. Korea Zinc finished up 1.1%, with Sterlite Industries (India) gaining 2.6% in afternoon trading.

Sinopharm's IPO goes well

In Hong Kong, debutante Sinopharm Group (HKG:HK:1099) opened up 21% at HK$19.40 compared with the shares' HK$16 initial public offering price. Sinopharm finished the day at HK$18.52 in heavy trading.

Also making big gains, shares of Geely Automobile Holdings (HKG:HK:175) (OTC:GELYF) jumped 19% in Hong Kong as trading resumed following news a Goldman Sachs affiliate would take a stake in the company via convertible bonds and warrants.

/zigman2/quotes/200638713/delayed CBA 95.65, -0.04, -0.04%

Several regional financial stocks also made gains.

Shares of Commonwealth Bank of Australia (ASX:AU:CBA) (OTC:CBAUF) added 2.3% and National Australia Bank (OTC:NABZY) (ASX:AU:NAB) rose 2.7%, in line with Sydney's rally.

Also higher, Standard Chartered (HKG:HK:2888) gained 1.2% in Hong Kong, Shinhan Financial (NYS:SHG) added 0.3% in Seoul and HDFC Bank (NYS:HDB) climbed 2.7% in Mumbai trading.

In New Zealand, blue-chip stocks rose after data on gross domestic product showed the economy grew 0.1% in the three months ended June 30, ending a five-quarter string of contraction.

Fletcher Building (NZE:NZ:FBU) was up 1%, Nuplex Industries gained 1.6% and Fisher & Paykel Healthcare Corp. (NZE:NZ:FPH) was up 1%. The NZX 50 Index rose 0.2%.

The New Zealand dollar, which had already gained nearly 2 U.S. cents against the greenback in the last 24 hours, surged even higher, to $0.7255 from $0.7194, before the GDP data, which also fueled speculation that the Reserve Bank of New Zealand could hike interest rates.

Thumbs down given on Hynix bid

In Seoul, conglomerate Hyosung Corp. plunged by its daily limit of about 15%, under pressure as a result of the bid it submitted to buy a major stake in chip maker Hynix Semiconductor , shares of which fell 5.4%.

In commodities trading, light sweet crude for November delivery was recently down 9 cents at $71.67 a barrel. The contract had rallied 2.6% Tuesday on the New York Mercantile Exchange.

Spot gold was flat at $1,014.60 an ounce, after having both risen and fallen earlier.

The U.S. dollar continued falling against Japan's yen in Asia and was recently buying 90.88 yen, compared with 91.14 yen late in New York Tuesday. The euro was at $1.4793, compared with $1.4799, and at 134.46 yen, compared with 134.45 yen.

"It's difficult to see anything other than further weakness in the U.S. dollar from here," said Westpac foreign-exchange strategist Jonathan Cavenagh.

"The trend is your friend at the moment, and the trend for the U.S. dollar is down," he added.

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