Asia: Volatility returns as Chinese markets reopen

Asian stocks closed mostly lower on Monday, as volatility returned to after Chinese markets reopened after a two-day holiday at the end of last week.

Over the weekend, Zhou Xiaochuan, the governor of China’s central bank, said he expected Chinese markets to become “more stable”, adding the correction in the stock market was “almost done”.

However, despite the Xiaouchuan’s optimism, the Shanghai Composite moved in tight ranges for most of the session but closed down 2.52%, while Hong Kong’s Hang Seng slid 1.23%.

“Whilst Xiaochuan might be confident, at least publically, that the worst is over, investors aren’t fully convinced there won’t be more losses to come,” said Spreadex’s financial analyst Connor Campbell.

“It doesn’t help that the PBOC’s actions in the past few weeks have hardly eased the situation, meaning whatever assurances the central bank provides hardly carry the previously perceived omnipotent force of the Chinese government, a perception that was perhaps irrevocably damaged across August.”

After the close, Chinese authorities revealed the country’s foreign exchange reserves dropped last month as China moved to weaken its currency by selling US dollars.

The Asian giant's stockpile of greenbacks decreased by $93.9bn to $3.557trn in August, slightly more than economists had expected and marking the largest ever month-on-month decline.

There was better news out of Japan, where the Nikkei Stock Average climbed 0.38%, while the yen edged 0.14% lower against the dollar.

South Korea’s Kospi and Australia’s ASX both declined, losing 0.20% and 0.15% respectively, while markets in Southeast Asia recorded the biggest declines, with indices in Malaysia, Indonesia and the Philippines losing 0.9%, 2.3% and 1.8%.

Emerging-market currencies were also under pressure, in the wake of Friday’s US jobs report.

The dollar hit a fresh six-year high against the Thai baht after gaining 0.42%, while the greenback clinched a five-year high against the Philippine peso after climbing 0.1%.