China Stocks Rise on Reform Hopes

Shares in China bucked a slump across Asia early Tuesday, as Chinese investors became more hopeful about President Xi Jinping's calls for state-owned enterprise reform.

Japan's Nikkei Stock Average fell 0.9%, Australia's S&P/ASX 200 dropped 1%, and Korea's Kospi lost 0.3%. Hong Kong's Hang Seng Index was down 0.7%. China's Shanghai Composite Index, however, gained 0.6%.

In most of Asia, caution before a key U.S. jobs report Friday kept investors from making big bets, analysts said. Last month's release of starkly weak May jobs figures shook up markets, with traders concerned about the health of the U.S. economy.

This time investors are heading into the jobs data braced for surprises, and will "focus on consolidating portfolios rather than on taking on more risk," Citigroup strategist Siddharth Mathur said.

In China, however, stocks rose on the hope that the government was serious about state-owned enterprise reform, and on expectations of increased military spending as tension sin the South China Sea continue to simmer. President Xi Jinping, in an official Xinhua News Agency article late Monday, called for efforts to enhance the competitiveness and efficiency of state-owned companies. State-owned China National Complete Plant Import & Export Corp. was up 6.4%, and Luoyang Glass Co. jumped 5.3%.

Meanwhile, mainland-listed shares of China's largest home builder, China Vanke Co. Ltd., sank 10% for the second day in a row, hitting the limit on how far share prices can move in one day in China. Shares had resumed trading Monday after a six-month halt. Investors continued to sell Tuesday amid concerns over a potential asset swap deal that will dilute shares. The asset swap is designed to thwart a hostile takeover that is in progress.

Elsewhere, Japanese stocks fell while the yen moved stronger in the morning to last trade at 102.17 to one U.S. dollar. A strong yen increases the costs and weakens the foreign-currency returns of exporters and manufacturers.

In Australia, stocks extended Monday's losses as officials continued counting votes following the weekend's inconclusive federal election results. Traders are worried about a hung parliament, which would create political gridlock. Investors are also cautious ahead of the Reserve Bank of Australia's interest-rate decision due later Tuesday.

A slight decline in the price of Brent crude oil Tuesday morning to below $50 a barrel, a psychologically important level, also suppressed shares of oil producers in Asia. Australia's Woodside Petroleum Ltd. slipped 0.45%, the Chinese state-owned China Petroleum & Chemical Corporation fell 1.6% in Hong Kong, and Idemitsu Kosan Co. Ltd. lost 1% in Japan.

In other markets, Chinese authorities guided the yuan 0.2% weaker versus the U.S. dollar, compared with Monday's benchmark. The yuan's daily midpoint was fixed at its weakest level to the dollar since 2011.

Ewen Chew, Kosaku Narioka, Yifan Xie, Esther Fung and Robb Stewart contributed to this article.

(END) Dow Jones Newswires

July 05, 2016 01:15 ET (05:15 GMT)

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