Chinese shares volatile as most Asia markets fall again

Beijing's weakening of its yuan currency also played a key role in the equities downturn

Shanghai stocks swung sharply again today on continuing worries about China's economy, while most other Asian markets extended losses in one of the worst trading starts to a year.

After dropping more than five per cent yesterday -- taking its losses this year to almost 15 per cent already -- Shanghai rallied in the first few minutes before quickly see-sawing in and out of positive territory through the day.

The swift movements have become common on the volatile index, which has been hammered by a string of weak economic data out of China. The authorities' bungled handling of last week's stocks rout has also sowed doubt.

Beijing's weakening of its yuan currency -- raising questions about the opaqueness of its exchange rate policy -- also played a key role in the equities downturn.

That has in turn led to massive losses around the world, with several major bourses suffering their worst start to a year on record.

Today, the overnight rate which banks charge each other to borrow yuan in Hong Kong surged 53 percentage points to a record high of 67 per cent, amid speculation China's central bank was buying huge amounts of the unit.

"Worries about China persist," Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, told Bloomberg News.

"It's too early to say that we've found the bottom until we see more stability in the Chinese currency and until we see more confidence regarding global growth."

Shanghai ended 0.2 per cent higher but Hong Kong, which also tumbled Monday, lost 0.9 per cent.

Tokyo, which was closed yesterday for a holiday, sank 2.7 per cent as dealers there played catch-up with the rest of the region and the yen strengthened against the dollar.

The Japanese unit has risen more than two percent on the greenback so far this year.

Sydney slipped 0.1 per cent by the end of trade and Seoul lost 0.2 per cent.

In early European trade London edged up 0.1 per cent, and Paris and Frankfurt each gained 0.1 per cent.

In Hong Kong analysts said the People's Bank of China had likely stepped in to prop up the yuan and fend off speculators as the unit tumbles.

Albert Leung, a Hong Kong-based rates strategist at Nomura Holdings, added that he expected yuan interest rates to "remain highly volatile in the next couple of days".

US markets provided some positivity, with the Dow and S&P 500 moving higher Monday. However, investors remain on edge over China and over the fall in oil prices due to a supply glut, anaemic demand and a weak global economy.