Asian markets sink as Shanghai falls further

Hong Kong (AFP) - Asian markets mostly fell again Tuesday, with Shanghai seeing another round of wild volatility a day after its heaviest one-day loss in more than eight years.

Fears of a resumption of the rout that hit Chinese shares over a month until July 8 sent global traders running Monday, with Wall Street falling for a fifth day in a row and safe-haven gold edging back up after a recent slip.

The dollar recovered in Tokyo trading, although analysts said the latest crisis on Chinese markets could affect the Federal Reserve's decision on when to raise US interest rates.

Shanghai, which collapsed by 8.48 percent Monday, ended 1.68 percent lower, dropping 62.56 points to 3,663.00. The benchmark index gyrated sharply through the day between a 5.0 percent decline and a one percent rise.

However, Hong Kong -- which sank more than three percent Monday -- clawed back early losses to end up 0.62 percent, or 151.98 points, at 24,503.94.

Tokyo eased 0.10 percent, or 21.21 points, to 20,328.89 and Sydney edged down 0.09 percent, or 5.19 points, to end at 5,584.7. Seoul was flat, edging up just 0.27 points to 2,039.08.

Chinese investors rushed for the exit Monday as more data showing the economy still struggling combined with fears that government measures to prevent a market crash -- including providing vast sums to support shares -- would not last.

The moves -- introduced after a more than 30 percent dive that wiped trillions off valuations in just under four weeks -- had been credited with helping to stem the bleeding, stabilise trading and put prices back on an upward trajectory.

Before its slump the market had surged more than 150 percent in a year to hit a near-term peak on June 12.

Tuesday's losses came despite assurances from Beijing that it would find more cash to provide stability to jittery share markets.

State-backed China Securities Finance Corporation, which has reportedly already pumped billions of yuan into mainland equities under a government plan, will continue to buy stocks, the state-run Xinhua news agency reported.

"The worst time has passed but we think there is a final leg for this correction," said Steve Yang, strategist at UBS Group AG. "Fundamentally there is no reason for funds to come in and buy aggressively."

But Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong, warned the latest comments might not be enough without concrete action.

"The government?s current intervention was not able to stop the market's slide and only delayed the decline."

- Return of volatility -

As of late last week Shanghai shares had climbed about 17 percent since hitting a trough on July 8.

Analysts said the events could be a key issue at the Fed's policy meeting this week. While it is not expected to raise US interest rates now, dealers are hoping for some guidance on its plans.

"The return of market volatility in China will be a significant discussion point at the US Fed in terms of what this is telling us about the Chinese economy," said Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd. "There is a lot of global weakness and significant external risk."

The dollar rose to 123.61 yen in Tokyo Tuesday, from 123.24 yen in New York.

The euro changed hands at $1.1066 and 136.80 yen against $1.1091 and 136.69 yen in US trade.

Gold, considered a safe bet in times of crisis, fetched $1.096.08 an ounce compared with $1.096.60 late Monday, but is much higher than the $1,080.50 at the end of last week.

Oil prices continue to suffer from fears about the global economy as well as an oversupply.

US benchmark West Texas Intermediate for September delivery fell 31 cents to $47.08 and Brent crude for September lost 62 cents to $52.85.

In other markets:

-- Taipei rose 0.30 percent, or 25.81 points, to 8,582.49.

Taiwan Semiconductor Manufacturing Co was unchanged at Tw$134.0 while Largan Precision, a leading smartphone camera lens maker, gained 4.05 percent to Tw$3,215.

-- Wellington lost 0.40 percent, or 23.68 points, to 5,848.38.

Spark was down 0.35 percent at NZ$2865 and Trade Me slipped 1.17 percent to NZ$3.39.

-- Manila closed 0.91 percent, or 68.41 points, lower at 7,479.03.

Universal Robina was down 0.26 percent at 190 pesos, Philippine Long Distance Telephone fell 0.41 percent to 2,888 pesos and GT Capital Holdings slipped 1.36 percent to 1,381 pesos.

-- Bloomberg News contributed to this report --

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