By Gregor Stuart Hunter
China's stocks fell early Tuesday, casting doubt on the potency
of Beijing's aggressive rescue efforts, while investors elsewhere
in Asia appear to shrug off concerns over Greece's debt
situation.
The Shanghai Composite is down more than 3%, wiping out a
rebound on Monday. The Shenzhen Composite fell 3.4% while the
ChiNext board, composed of smaller cap stocks, and sank 4.2%. All
indexes are off more than a quarter from June highs.
Stocks in Hong Kong recovered after their biggest fall in three
years on Monday, with the benchmark gaining 0.6%. A gauge of
Chinese companies with Hong Kong listings, known as H-shares, was
flat.
China has rolled out a steady stream of measures to arrest the
selling frenzy that knocked $2.4 trillion in value from China's
equities over the past three weeks. Shanghai recovered modestly
Monday, which some investors and analysts attributed to heavy
buying of blue-chip stocks by state-backed funds. Despite the
recent rout, Shanghai shares are up 82% over the past year, and 16%
since January.
Yet China's volatility is starting to spill into global markets,
as Beijing's moves to arrest stock selloffs have darkened the
outlook for the world's second-largest economy. Oil prices tumbled
nearly 8% Monday, their biggest single-day decline in more than
three months, amid fresh fears about weaker demand from China, one
of the world's largest consumers of raw materials. Nymex crude
rebounded 0.8% to $52.93 in early trading Tuesday.
Over the weekend, Chinese brokerages, mutual-fund managers and
an investment arm of the government committed to buying stocks,
while new initial public offerings were halted. Quotas for
foreigners to buy stocks were increased and the central bank
pledged to provide funds to help investors borrow to buy
shares.
Elsewhere, Asian markets rose early Tuesday as investors appear
hopeful that a resolution between Greece and its creditors is still
within reach.
"It seems that investors either believe that 'Grexit' can still
be avoided, or that, if it does happen, the contagion will be
limited," analysts from Capital Economics wrote in a research
report.
Greece's vote on Sunday to reject creditors' demands, including
pension cuts and tax increases, could put Greece closer to exiting
the eurozone. That led markets in Europe and the U.S. lower, though
the declines weren't as dramatic as expected. The euro is unchanged
against the U.S. dollar, while the yen gained 0.1% against the
dollar.
The Nikkei 225 Stock Average rose 1.3% while South Korea's Kospi
Composite was flat.
Australia's S&P/ASX 200 rose 1.8% with falling oil seen to
lower operating costs for energy-intensive commodity producers.
Traders also await an interest-rate decision from the Reserve Bank
of Australia, which is expected to remain on hold.
Meanwhile, banks warned that Malaysia's financial markets could
see further stress, after the country's currency fell to its lowest
level this month since its peg to the U.S. dollar ended in 2005.
Malaysian markets have been under pressure this year as the
oil-exporting nation is hit by falling commodity prices, which have
nearly halved since July last year.
"Among Asian financial assets, Malaysia's are the most exposed
to oil," analysts from ING wrote in a research note. Efforts to
strengthen the ringgit "will give way if oil prices continue to
decline," the bank added.
The ringgit is up 0.4% against the U.S. dollar after hitting
lows of 3.8260 earlier Tuesday.
Malaysia's currency also has come under pressure as political
strain builds against the country's prime minister. The Wall Street
Journal earlier reported that Malaysian government investigators
looking into the activities of state investment fund 1Malaysia
Development Bhd., or 1MDB, had traced almost $700 million in
deposits into what they believe are Mr. Najib's personal accounts.
Mr. Najib has denied wrongdoing.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com