Asia: Shanghai bounces back, analysts say China situation 'more worrying than Greece'

Asian stocks rebounded on Thursday driven by stabilisation in China following drastic measures from regulators and encouraging inflation data.

The Shanghai composite index was down during the first hours of trading but bounced back into positive territory and finished 3.88% higher, as several drastic initiatives instituted by authorities seemed to stemmed the sell-off.

The China Securities Regulatory Commission has banned major shareholders with stakes of more than 5%, corporate executives and directors, from selling holdings in listed companies for six months.

Deutsche Bank said the measure was a "truly breathtaking initiative" and warned the China situation is "more potentially worrying than Greece for global markets".

On Wednesday, Shanghai stocks fell as much as 8% after being hurt by a massive sell-off, with 1,287 companies or 45% of the market being frozen overnight as companies halt trading, wipping off $2.5trn.

Rabobank analysts said "metaphorically, we are ‘one LP away’ from sealing the market off from the real world, which is hardly going to encourage investors to crawl into it again in the future when the ‘walls’ are taken down."

On the bright side, Berenberg economists noted China is better able to contain the fallout from financial problems than any other major economy in the world due to "massive forex reserves worth some 35% of GDP, a domestic savings rate of some 40% of disposable income, a balanced external sector and a banking system that can still respond fast to any central directive to increase lending if aggregate demand needs a shot in the arm".

In economic news, according to data published by the Chinese National Bureau of Statistics, producer prices contracted 4.8% year-on-year in June, against expectations of a softer decline of 4.5%.

However, consumer price index increased 1.4% in a annual basis, beating forecasts of 1.3%.

Capital Economics analysts said: "Although the recent softening in global commodity prices helped pull down producer price inflation last month, today’s data still suggest that domestic price pressures are rising and that deflation concerns are overplayed."

Hong Kong's Hang Seng followed the lead and rose 3.87%.

In Japan, the Nikkei 225 index was up 0.6% thanks to the China rebound, but was hurt by a stronger yen following the publication of the Fed's minutes, where members remained dividend about a US rate rise.

The Japanese currency was at ¥121.42 against the dollar.

In terms of data, machinery orders jumped 19.3% year-on-year in May, from 3% the month before and beating expectations of an increase of 16.3%.

Foreign bond investment, according to the Ministry of Finance, rose in June to ¥205.2bn from ¥-42.8bn.

In the corporate world, Fast Retailing gained more than 4% following news that its profit rose 52% in the nine months ending May, driven by an increase in its Uniqlo's casual-wear sales in Japan.

Automobile manufacturer Nissan Motor continued to fall one day after revealing an air bag made by Takata Corp installed in one of its cars had deployed abnormally.

Elsewhere in Australia, the ASX index closed slightly up by 0.3%, despite weak commodities prices and a stronger Australian dollar following US Federal minutes.

The stocks were helped by better-than-expected jobs data. Unemployment rate came at 6% in June, an increase from 5.9% one month earlier but better than forecasts of 6.1%.

Meanwhile, the number of people who secured a full-time job in June rose to 24,500 from only 15,100 in May.

On the forex front, the Australian dollar was at $0.7464 against the US dollar.