By Chao Deng
Asian shares bounced off their morning lows after a gauge of
China's service sector reached an 11-month high, brushing off
concerns that a rise in U.S. interest rates could be getting
closer.
The Shanghai Composite Index is up 0.3% at 3767.98 and the
smaller Shenzhen Composite is up 0.9% at 2170.06 after moderate
losses earlier Wednesday.
Hong Kong's Hang Seng Index is up 0.5% and a gauge of Chinese
companies listed in the city is up 0.9%.
As China's economy has slowed, its services sector has held up
better than its manufacturing sector, a gauge of which fell to a
two-year low earlier this week. On Wednesday, the Caixin China
services purchasing managers index rose to 53.8 in July, compared
with 51.8 in June. A reading above the 50-level indicates expansion
in activity.
China's main stock index is extending gains from Tuesday, after
Chinese authorities moved to clamp down on short selling a day
earlier. The new short-selling rules require investors to wait at
least one day to cover their positions and pay back loans used to
buy shares. When shorting a stock, investors sell borrowed shares
on the belief they can buy them back at a lower price later,
pocketing the difference.
Despite the positive moves, Shanghai remains more than a quarter
off from its June high and has fallen more than 8% since July
23.
Late Tuesday in Washington, officials at the International
Monetary Fund said China will likely have to move ahead with market
liberalization before it labels the country's yuan a reserve
currency, signaling a decision could be pushed into next year.
The Chinese yuan rose to as high as 6.2248 against the U.S.
dollar, from 6.2180 late Tuesday in Asia. The closely managed yuan
had been stable in recent months, despite volatility in China's
stocks, but markets expect it to weaken.
Elsewhere, Japan's Nikkei Stock Average rose 0.5% and South
Korea's Kospi gained 0.3%. Australia's S&P ASX 200 was down
0.6%,
Earlier Wednesday, stocks in the region followed losses in the
U.S. after Federal Reserve Bank of Atlanta President Dennis
Lockhart said the economy is ripe for a rise in short-term interest
rates. The Fed's easy-money policies after the global financial
crisis, broadly mirrored by global central banks, have helped fuel
stock rallies.
"Investors are looking for clues to the U.S. central bank's rate
hike timing," said Shun Otsuka, general manager of research and
strategy at Ichiyoshi Asset Management, adding that markets will be
watching monthly jobs data, set for release on Friday. Investors
have been parsing economic data, from inflation to wages, for clues
about when the Fed might raise rates.
In Japan, which is midway through its earnings season, investors
are looking for companies that might announce share buybacks to
increase shareholder returns, added Mr. Otsuka. He noted that the
scale of buybacks in terms of share value is already at a
seven-year high.
A potential rise in U.S. interest rates, weak oil prices and
worries about political instability have thrust Malaysia's ringgit
to multiyear lows recently. Lower oil prices, which recovered
somewhat after breaking below $50 a barrel in recent days,
threatens Malaysia's oil-linked revenue and an investigation into
the country's troubled investment fund has dented investor
confidence. The U.S. dollar traded as high as 3.8770 against the
Malaysian ringgit, from 3.8506 late Tuesday.
The Australian dollar, which had fallen near six-year lows
earlier this week, strengthened after the central bank kept
interest rates steady Tuesday and unexpectedly dropped its usual
rhetoric about the need for further currency depreciation. The
currency last traded at $0.7372, giving up gains after trading as
high as $0.7428 yesterday.
"The market was completely caught off guard because, given the
weakness in the Chinese economy and the decline in commodity
prices, everyone thought that not only would Australian data be
weak but the Reserve Bank would grow increasingly dovish," said
Kathy Lien, managing director at BK Asset Management in New
York.
Oil prices rose in U.S. trading overnight on expectations
inventory data due Wednesday would show U.S. crude-oil supplies
fell last week. In Asia trade, futures for Brent crude were up 0.2%
at $50.09.
Gold is down 0.6% to $1,084.20 in Asian trade.
Bradford Frischkorn and Vera Sprothen contributed to this
article.
Write to Chao Deng at Chao.Deng@wsj.com