Chinese Stocks Climb Alone

Global credit jitters once again weighed on Asia's markets for the beginning of the week, as investors watched early gains in the Hang Seng and the Nikkei evaporate toward the end of the day.

Only Chinese mainland markets bucked the trend, rising on bargain hunting, and taking advantage of the mainland domestic markets' traditional shield against foreign exposure.

In Hong Kong, the Hang Seng slumped 341 points, or 1.2%, to 28,501, while in Japan the Nikkei ended nearly flat, down 31 points, or 0.2%, to 15,924. The South Korean Kospi fared worst of all, sliding 28 points, or 1.4%, to 1,906, while in India, the Bombay Sensitive Index lost 35 points, or 0.18%, to 19,930. Only China was different, with the Shanghai Composite Index rising 70 points, or 1.4%, to 5,161.

Monday's market performance was contrary to what many investors expected, since in Hong Kong, a potential interest rate cut by the Federal Reserve this week is seen as a positive for shares. In China, however, Beijing raised the reserve ratio requirement this weekend to an all-time high of 14.5%. Increasing that reserve ratio -- the amount of money banks are required to hold against deposits -- at the same time as announcing a policy of further tightening is a negative for equities.

"It looks very strange when we see the market index increase over 2% today after a rise in the reserve ratio requirement, but many investors, especially institutional investors, take this reserve ratio hike as the last bad news for the end of this year," says Cheng Wei Qing, chief strategist at CITIC Securities in Beijing. "Another reason [for Chinese equity gains] is that gradually... many mid- and small-caps have decreased in value to a reasonable level."