Most Chinese Stocks Decline After Index Rises to Three-Week High

The promise, which analysts said was designed to soothe investors’ frazzled nerves, came after the central bank’s shock devaluation of the yuan last week plunged global financial markets into turmoil.

Look at where major market index futures stood before the start of regular trading.

Sydney rose 0.31 percent, while Seoul dropped 0.46 percent and Hong Kong dipped 1.03 percent in morning deals.

The dollar strengthened after solid US data boosted expectations of an imminent rate rise, heaping pressure on oil prices after they slid to a six-and-a-half-year low last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%.

The Shanghai Composite Index closed down 6.1 percent at 3,749.12 points in its biggest daily decline since July 27, snapping a three-day winning streak.

“Based on the time cycle, I expect the rebound to continue until the end of August”, Zhang Qi, an analyst from Haitong Securities, said, adding: “The market is less uncertain than before”. Malaysian stocks suffered a 1.5% fall and the ringgit was stuck near a 17-year low. Power firm Electricity Generating lost 1.61 percent to 153.00 baht, while oil company PTT dropped 1.66 percent to 297.00 baht.

Asian stocks posted a higher open on Monday, as a positive lead from the US offset a lackluster second-quarter growth report from Japan. Although a contraction was expected, concern that the third quarter may see only mild improvement could rekindle the expectation of further monetary easing by the Bank of Japan (BoJ). The Dow Jones industrial average rose 0.4 percent to end at 17,477.40 and the S&P 500 climbed 0.4 percent to 2,091.54.

Meanwhile, the People’s Bank of China on Monday, setting the yuan’s midpoint at 6.3969, a touch firmer than the previous session’s fix of 6.3975. It is believed that the dollar will rise further as the Yuan displayed signs of stability for now. “With reduced volatility, fears on passthrough from the China devaluation to Fed policy should subside and this may see focus shift back to the situation in the United States”, wrote Todd Elmer, head of Citi’s G10 strategy in Singapore.

China’s securities regulator said last Friday that the government will allow market forces to play a bigger role in determining stock prices, the first official signal from Beijing that it could be moderating its efforts to prop up its equity markets via state-backed financial institutions. Analysts say the poor results so far could trigger more money pumping measures by the central bank in the coming months, to provide stimulus to the stock market.

ENERGY: U.S. crude oil fell 55 cents to $41.95 in electronic trading on the New York Mercantile Exchange. “Concerns that the slowdown in China will hurt other Asian countries with close link to China are weighing as well”, Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.