Asia: China rebounds; Sydney, Tokyo suffer record New Year losses

The Chinese roller coaster ride continued on Friday, and much to the relief of mainland investors, the carriages were on the incline this time.

The Shanghai Composite Index finished up 1.97% at 3,186.41, a slight recovery from the 7% dive it took during the 30-minute trading day on Thursday. Markets appeared to be in a less fidgety mood, given Beijing had suspended its new circuit-breaker rule which closed the markets twice this week.

There was also fresh optimism in the renminbi, as the central bank guided the onshore yuan's loose peg upward in a bid to calm the markets. It had reached its lowest level against the greenback on Thursday, but was seen trading at 6.5883 on Friday. The onshore yuan can trade 2% either side of the central bank's guidance.

Beijing's National Team were also mooted as a reason for the calm by some analysts, with Forsyth Barr Asia's Bill Bowler saying "it's not unfair to think they're in there to some extent". The so-called National Team are a group of state-owned funds tasked with buying stocks at times of volatility.

Many analysts and traders believed the circuit breaker - which pauses the markets for 15 minutes on a 5% decline, and closed them for the day on a 7% drop - was only working to panic investors, and give them time to put in reactionary sell orders.

There was additional criticism that the thresholds were set too low. Research by Chinese wealth management firm Noah Holdings showed that, in the 60 trading days between June 8 and September 9 last year, the markets fluctuated by 5% on 12 occasions.

Friday morning had started out looking like another shocker, with the Shanghai boards falling more than 2%. Afternoon trading picked up the morning's slack, however, with the blue-chip benchmark SSE 50 climbing 2.6%.

The SHCOMP was still finishing the week down 10%, despite Friday's gains.

Beijing's disastrous half hour on Thursday had serious ripple effects around the globe - the Dow Jones Industrial Average fell by almost 400 points and the Stoxx Europe 600 lost 2.2%, with commodities following suit.

But things were looking more stable in the region as a whole in Friday's trading. The Hang Seng Index was up 0.59% and the Kospi was up 0.7%, while the Nikkei Stock Average lost 0.39%. It was the fifth straight loss for Tokyo, and the first week-long New Year loss for the Nikkei since World War II.

Friday's losses in Tokyo had some analysts puzzled, as the stability in Shanghai and in the yuan was expected to have a positive knock-on effect in the region. Some did point to the impending release of US unemployment figures at 1330 GMT.

"Depending on the results of the jobs data, Tokyo stocks could rebound next week", said SBI Securities head of investment market research Hideyuki Suzuki.

This week's star student, the yen, weakened against the US dollar as well, slipping 0.55% to 118.32 JPY.

In Singapore, the Noble Group plunged by 7% at one point and closed down 1.45% after Standard & Poors cut the commodities trader's rating to junk status.

It was another blow for a firm faced with accusations of accounting regularities and a low commodities price environment. The FTSE Straits Times Index was up 0.78%.

In the antipodes, the S&P/ASX 200 fell 0.39%, bringing Sydney's total weekly losses to 5.7% in what was the worst start to a year on record. All sectors in the Australian share market were in the red, with resources and banking - two of the country's largest industries -suffering the most.

In Wellington, the S&P/NZX 50 fell 0.9%, with local analysts suggesting the low volumes seen on Friday meant the plunge in China may have been exaggerated, as investors weren't clambering to exit their stocks.

The Aussie dollar strengthened against the USD, up 0.06% to AUD $1.4253. The Kiwi weakened by 0.21% to NZD $1.5121, bringing more relief to that country's agricultural exporters.

Oil prices were relatively stable after Asia trading. West Texas Intermediate fell 0.06% to $33.25 per barrel, and London Brent was up 0.9% to $33.78.