Asia report: China sinks as investors cash out

Stocks in Asia pared back much of their early gains on Wednesday, with markets in China being hit particularly hard.

The Nikkei 225 advanced 0.19% to 16,905.54, though it was up by more than 1% earlier in the session.

With the US dollar relatively weaker coming into Wednesday, the yen made solid gains during Asian trading after losing some ground late on Tuesday. It was last 0.23% stronger at JPY 108.96 per dollar.

Japanese exporters were mixed, with the carmakers trending down. Toyota lost 0.65%, Nissan was down 0.97% and Honda slid 0.91%. Electronics and entertainment giant Sony shot ahead 3.9%.

Last week’s earthquake was still affecting some exporters, with Sony, Toyota and Honda all suspending at least some of their production capacity in the south of the country.

Another automaker, Mitsubishi Motors, saw its shares tumble 15% after reports surfaced that one of its car models failed a fuel economy test.

After market close, the company admitted it had falsified fuel economy test data for more than 600,000 cars - 157,000 of its own light passenger models and 468,000 produced for Nissan.

On the mainland, the Shanghai Composite Index closed down 2.31% at 2,972.56, though it had fallen as much as 4% during the session. The Shenzhen Composite finished down 4.42% at 1,871.51.

In a note on Wednesday, analysts at Nomura advised taking money out of the markets in China.

"We are nearing the point where things are as good as they get for the first half of 2016: China's growth is stabilizing, so is the renminbi exchange rate to the U.S. dollar and capital outflows, while consensus forecasts show low likelihood of a June Fed rate hike," it said.

"In coming months, rising default among private and state-owned enterprises credit and closure of zombie companies as part of supply-side reforms, could raise headline risk.”

In Korea, the Kospi gave up early gains to close down 0.27% at 2,005.83, while Hong Kong’s Hang Seng Index slid 0.93% to finish at 21,236.31.

The region received a boost in early trading, with a weak dollar and rising oil prices blowing steam into the markets.

National Australia Bank currency strategist Rodrigo Catril said “softer U.S. housing data boosted the case for a lower-for-longer Fed, weakening the big dollar along the way."

Oil prices retreated during Asian hours, dragged by news that Kuwait oil workers were ending their three-day strike, which had cut the OPEC member’s production by almost two thirds for three days.

Brent crude was last down 1.97% at $43.18, and West Texas Intermediate lost 2.07% to $41.61 per barrel.

Down under, the S&P/ASX 200 added 0.52% to finish at 5,215.95, led by a 2.07% jump in the materials subindex.

Energy plays in the country were mixed after the Kuwait announcement, with Santos rising 3.19% and Woodside Petroleum losing 1.57% in Sydney.

The financials subindex started the day poorly, but retraced losses to finish up 0.09%. The ‘big four’ Australasian banks - the group of financial giants which lead the banking sectors in Australia and New Zealand - were mixed. Australia and New Zealand Banking Group lost 0.67%, Commonwealth Bank of Australia slid 0.2%, National Australia Bank was down 0.15%, and Westpac gained 0.69%.

Banking stocks were sold off earlier in the day, after federal treasurer Scott Morrison announced banks were to pay an extra AUD 120m to increase the kitty at the Australian Securities and Investment Commission, to investigate financial misdeeds further.

Resources were up, with Rio Tinto advancing 4.08%, Fortescue adding 4.22% and BHP Billiton finishing 3.41% higher.

New Zealand’s benchmark edged closer to the 7,000 mark, with the S&P/NZX 50 rising 0.4% on Monday to reach a new all-time high of 6,901.27. Local analysts pointed out that the index had outperformed most global markets in 2016, gaining 8.7% and reaching a number of all-time records.

Wednesday’s record close was the sixth in a row.

Local dollars on both sides of the Tasman Sea were weaker against the greenback, with the Aussie moving 0.02% to AUD 1.2801, while the Kiwi was off 0.54% at NZD 1.4271.