Asian Stocks Mostly Lower After China's Fifth Rate Cut

Tokyo shares were 0.70 per cent higher in volatile early trade Wednesday after China's central bank slashed interest rates for the fifth time in nine months to shore up the world's second-largest economy.

The Nikkei-225 index at the Tokyo Stock Exchange opened higher but dipped in and out of negative territory after the opening. It was up 125.11 points to 17,931.81 at around 9:40 am.

"The market environment, with the Dow's fall and currency rates, is putting more downward pressure on Tokyo shares," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp.

"Investors are monitoring the Shanghai opening" at 10:30 am.

US equity markets saw an early surge Tuesday and stayed in the black for much of the day, but faded sharply before the close as jitters sparked by concerns over the health of the Chinese economy returned to the market.

Stocks in China have fallen sharply over fears that the world's second-biggest economy, a key driver of global growth, is weaker than thought.

Shanghai shares plunged 7.6 per cent Tuesday, extending their worst four-day rout in almost two decades as investors feared the heady share prices on China's main exchange were unjustified amid the slowdown.

Hoping the stem the losses, China's central bank announced after Tuesday's close that it would cut interest rates by 0.25 percentage points.

In currency trade, the dollar remained under pressure at 118.72 yen, little changed from 118.84 yen in New York trade Tuesday, but dramatically weaker than the 122.06 yen seen in US trade on Friday.

The euro stood at $1.1552 and 137.14 yen in Tokyo, compared with $1.1518 and 136.87 yen in New York overnight.

Meanwhile, Shanghai shares see-sawed in volatile early trade Wednesday, after China cut interest rates in a bid to tame worries over the economy following two days of heavy market falls.

The benchmark Shanghai Composite Index opened 0.53 per cent higher, then dropped as much as 2.31 per cent before returning to positive territory, all within the first 20 minutes.

After about half an hour it was up 0.74 per cent, or 21.84 points, to 2,986.81.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, was down 0.12 per cent, or 2.07 points, to 1,747.00.

At 7:55 a.m. (IST), the Shanghai Composite index was down 1.6 per cent and Shanghai Shenzen index fell 0.8 per cent.

"In all, the central bank's move has helped with the market sentiment today, despite the current volatility," Phillip Securities analyst Chen Xingyu told AFP.

The cuts "do help ease the current tension", he said, but added: "It's unrealistic to think that the government measures can turn the market tide completely."

Zhang Yanbing, an analyst from Zheshang Securities, said "panic sentiment" had waned but warned: "There will still be fluctuations as views towards the market's prospects are divided."

Chinese shares have plunged in recent weeks, falling more than 40 percent from their mid-June peak, which they reached on a debt-fuelled rally.

Worries about slowing growth in the world's second-largest economy and its potential impact on the rest of the world have seen shockwaves reverberate globally.

Extensive interventions by authorities have only temporarily stopped the Chinese market declines, which saw Shanghai plummet 8.49 per cent on Monday, followed by a 7.63 per cent fall on Tuesday.

After Tuesday's close the central bank cut its benchmark lending and deposit interest rates by 0.25 percentage points each and its reserve requirement ratio by 0.50 percentage points, a move which increases the amount of money banks can lend.

It was the fifth interest rate cut since November.

China's "economic growth rate remains under pressure", the central bank said in a statement, adding the cuts were meant in part to "support the real economy to continue to develop healthily".

Hong Kong stocks rose 0.14 per cent in early trading Wednesday, after China cut interest rates in a bid to restore confidence in its slowing economy.

The benchmark Hang Seng Index soon fell 126 points or 0.6 per cent to 21,434.25 in opening deals.