Asia report: Shanghai, Wellington buck regional downturn

The global rally in shares seen at the start of the week ground to a halt in Asia on Wednesday, with most indices in the region slipping as scepticism around a Russia-Saudi Arabia oil production freeze rose.

In Tokyo, the Nikkei Stock Average fell 1.36% to 15,836.36, after it rose 7.4% on Monday and Tuesday. Investors had snapped up shares earlier in the week, particularly in the finance sector which had been battered so far this year.

"The bounce in sentiment [this week] is in danger of fading into memory. The Russian-Saudi agreement to freeze oil output is being treated with a massive dose of scepticism," said Kit Juckes, head of forex at Société Générale.

"Those of use who are affected by oil prices, but not terribly confident of where they are going in the short term, are left reacting to volatile moves."

During Asian trading, oil fell, with Brent crude reaching as low as $32.04. It recovered as the region went to bed - Brent was last up 2.66% to $33.06, and West Texas Intermediate was up 1.76% to $29.56.

The yen eased back against the dollar late in the day, having surged ahead earlier. It was last down 0.05% against the greenback at JPY114.13.

The fall in Asia saw Japanese explorer Inpex Corporation lose 6.74%, and oil distributor JX Holdings dipping 4.27% in Tokyo. Nippon Steel & Sumitomo Metal dipped 3.35%.

SoftBank Group's announcement late Monday that it was to repurchase JPY 500bn in shares - its biggest buy back ever - was still having an effect, with the stock rising 5.84% on follow-throughs. It had risen 16% on Tuesday.

The Nikkei was now off 17% since the start of the year. A fund managers' survey by Bank of America Merrill Lynch showed allocation to the market had fallen to a new 24% overweight this week, from 31% overweight in January.

It also showed global fund managers had the highest cash balances since November 2001, at 5.6% of their portfolios.

Over on the mainland, the Shanghai Composite rose 1.08% after Beijing made fresh pledges to support financing for the real economy. The promises came from eight separate regulatory bodies, including the People's Bank and the banking and stockmarket regulators.

It was the latest in a steady stream of comment from Chinese officials in recent days, in an apparent bid to reduce the fear of capital flight which had plagued Shanghai since the start of the year.

Commerce Ministry spokesperson Shen Danyang said at a conference on Wednesday that there was no basis for concern about a sustained depreciation of the yuan. It was last trading 0.16% weaker against the greenback, at CNY 6.5273.

Elsewhere, the Hang Seng Index fell 1.03% and the Kospi lost 0.23%. In Australia, the S&P/ASX 200 slipped 0.57% on the disappointing oil sentiments, and one of the biggest days of the Sydney reporting season.

Woodside Petroleum lost 6.9% and Oil Search was down 3.8%, while local bottler Coca-Cola Amatil gained 4.1% after returning to profit growth for the first time in three years.

In New Zealand, the S&P/NZX 50 bucked the regional trend and gained 0.2%, with local traders describing the day as 'wild', as several firms posted results.

Star dairy exporter A2 Milk gained 3.5% after touching an all-time high during the session, having posted a boost in first-half profit. A slump in demand for 70s-chic Formica dragged Fletcher Building by 2.5%, despite posting a 51% gain in first half profit.

The dollars down under gained on the USD, with the Aussie up 0.28% to AUD 1.4022 and the Kiwi inching 0.24% to NZD 1.5161.

South Korea's won reached its weakest level against the greenback since July 2010, coming off expectations the Bank of Korea would cut interest rates in the near term, after leaving them alone on Tuesday.

It was last at KRW 1,226.98 to the dollar, having weakened 0.86%.