Mainland China markets drop before paring losses; Evergrande crisis closely watched

Markets in mainland China returned to trade on Wednesday following holidays on Monday and Tuesday.

Mainland China markets drop before paring losses; Evergrande crisis closely watched

SINGAPORE — Markets in mainland China fell more than 1% on Wednesday's open before bouncing back slightly amid the ongoing Evergrande crisis, as markets reopened for trade after a two-day holiday.

With global markets selling off earlier this week, investors kept a close watch on the China markets for any fallout surrounding the embattled developer.

Both the Shanghai composite and Shenzhen component dropped more than 1% in early trade, before easing off on some of those losses. The Shanghai composite was last down 0.5% while the Shenzhen component slipped 0.929%.

Meanwhile, the CSI 300 index that tracks the largest stocks listed on the mainland declined more than 1%.

Markets in Hong Kong were closed for a holiday. On Monday, the Hang Seng had plunged more than 3% before paring some losses on Tuesday.

"Investors will look for signs of intervention by government to prevent a disorderly default by property company Evergrande. Market turmoil surrounding the developer intensified in the past trading sessions as investors interpreted government's silence hitherto on the distressed firm as a lack of official support," Singapore bank DBS wrote in a note on Wednesday.

Evergrande's shares in Hong Kong had slumped 10.6% on Monday and Tuesday combined, taking year-to-date losses to 85%, the bank noted.

China on Wednesday also kept its benchmark lending rate unchanged, with the one-year loan prime rate (LPR) held steady at 3.85%. The five-year LPR remained at 4.65%. That was largely in line with expectations of traders and analysts in a snap poll who predicted no change to both the one-year and five-year LPR, according to Reuters.

Other Asia-Pacific markets

Elsewhere in Asia, the Nikkei 225 in Japan slipped 0.58% while the Topix index shed 0.71%.

The Taiex in Taiwan dropped 2.28%. South Korea was closed for a holiday.

In Australia, the S&P/ASX 200 edged 0.67% higher.

MSCI's broadest index of Asia-Pacific shares outside Japan traded 0.38% lower.

Bank of Japan holds steady on policy

The Bank of Japan on Wednesday held steady on monetary policy, keeping its short-term interest rate target at -0.1% while that for 10-year Japanese government bond yields was kept at around 0%.

The Japanese central bank warned in its monetary policy statement that the employment and income situation "remained weak" due to the Covid impact, while private consumption has "remained stagnant" due to sustained strong downward pressure on services consumption.

The Japanese yen traded at 109.42 per dollar, having strengthened from around 110 against the greenback earlier this week.

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Overnight stateside, the Dow Jones Industrial Average dipped 50.63 points to 33,919,84 while the S&P 500 declined around 0.1% to 4,354.19. The Nasdaq Composite outperformed, rising 0.22% to 14,746.40.

Investors look ahead to the policy statement from the U.S. Federal Reserve, expected Wednesday stateside, for signals on when the central bank could taper its bond purchase program.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 93.229 after sliding from levels above 93.3 earlier in the week.

The Australian dollar changed hands at $0.7251, against an earlier low of $0.7221.

Oil prices were higher in the morning of Asia trading hours, with international benchmark Brent crude futures up 0.71% to $74.89 per barrel. U.S. crude futures gained 0.92% to $71.14 per barrel.