Asia: North Korean bomb test shakes up markets

North Korea's apparently successful testing of a hydrogen bomb shook up Asian markets on Wednesday, although hints of some government help stabilised Chinese markets further.

Seismic monitors on the Korean peninsula recorded a short, sharp shockwave of magnitude 5.1, which was consistent with the kind of wave expected from a large explosion. At the same time, the hermit state announced it had scucessfully tested its latest hydrogen weapon.

Locally, that saw the South Korean Kospi lose 5.1 points, or 0.26%, to close at 1,925.43. The won reached its weakest level against the greenback since September, slipping 0.76% to KRW 1197.20 per dollar.

The shockwaves reverberated down under as well, with the ASX 200 losing 1.18% and the NZX 50 dropping 0.3%. The retail sector has suffered in both Australia and New Zealand this week, led by the failure and receivership of one of the region's largest retail brands. Investors in Dick Smith were admonished by some analysts, who were critical of the retailer's apparent financial turnaround before it was flogged off by Anchorage Capital Partners.

In Hong Kong, the Hang Seng fell 0.98%, while Tokyo's Nikkei Stock Average lost 0.99%.

The yen leapt to new levels, reaching a three month high against the US dollar as investors clambered to apparent safe assets. It was at JPY118.31 per dollar at 1130 GMT, diminishing any earnings investors were expecting from abroad.

China staged an about-face from its dire start to the week, with the Shanghai Composite index gaining 2.25%. It had lost around 7% since the open on Monday, due to concerns about a slowdown in the Chinese economy, a weaker yuan and the impending lift of a no-sell order placed on major shareholders during the summer crash.

Both analysts and traders in the region pointed the finger at China's crack "National Team" for the Wednesday gains. The team is a group of state-owned funds tasked with holding up the market, and the gains were seen as a sign that they were ready to step in should losses become worse.

The regulator in Beijing also signalled on Tuesday that it was going to regulate selling among big shareholders, easing fears of mass selling on Friday, when the unloading ban expires.

Analysts understood the regulator's comments as meaning authorities would disallow aggressive unloading, and were armed and ready should the market destabilise. It was also unclear whether the ban would be lifted on Friday, or remain in place until new rules are figured out.

The market was likely to remain "volatile on a daily basis" until the exact nature of any forthcoming intervention was made clear, according to David Millhouse, head of China research at Forsyth Barr Asia.

There was also particularly strong performance in the Chinese resources sector, after Premier Li Keqiang announced the country's leadership was looking at measures to reduce the coal glut.

In Shanghai, China Shenhua Energy Co rose 9.91%, China Petroleum and Chemical Corp was up 3.38% and China Railway Construction Corp was up 3.22%.

The onshore yuan's loose peg was lowered again, and it traded at CNY 6.5580 to the dollar - a new five-year low.

Chinese technology firms which supply Apple fell after Cupertino announced it was mulling a potential production cut for the smartphone. Hon Hai Precision Industry fell 0.13%, while Taipei's Taiex declined 1.1% to its lowest close in more than two years.

In the antipodean currency markets, the Aussie was 1.27% weaker against the greenback at AUD $1.4140, and the Kiwi slipped 0.87% to NZD $1.5044.