Asia: Shanghai Rebounds, Tokyo Slips

A late rally into the green in China sent shares in Hong Kong to an 11-month high Tuesday, as financial stocks helped tug investor sentiment toward the upside after a bearish trading day.

China's Shanghai Composite closed up 31 points, or 1%, to 3147.79, after the index fell through the 3,000-point benchmark intraday for the first time in over a year. The Hang Seng jumped 217 points, or 0.9%, to 24,939.15, pulled higher by a late surge in China Life Insurance(LFC Quote). In Japan, the Nikkei dropped 148 points, or 1.1%, to 13,547.82, as investors mulled a weak trading day overnight in the U.S.

"The selloff in A-shares will continue in the short term as new policy released by China's government will encourage investors to sell their stocks as soon as possible. However, it seems the selloff doesn't have too much pressure on Hong Kong's stock market," said Castor Pang, a buy-side analyst for Sun Hung Kai in Hong Kong.

Pang said that the Hang Seng is holding up against the weakness in A-shares because most Hong Kong-listed stocks are already fairly priced and because locals are taking their cues from the performance of U.S. markets rather than domestic Chinese markets. ...