On Thursday, fresh worries emerged that China’s stock regulator might start approving companies’ share-placement applications as early as this Friday. The prospect of new shares could prompt investors to withdraw cash from existing positions.
“The fact that the regulator didn’t deny [local media reports of the timeline] last night confirmed investor concern, thus dragging down the market,” said Zhang Gang, an analyst at Central China Securities.
Chinese markets reacted with a decline with the Shanghai Composite last down 0.3% at 3,682.31 and the smaller Shenzhen Composite lower 0.3% at 2,122.20.
Dollar-denominated MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.8 percent at 0606 GMT.
Japan's Nikkei index, the only Asian market in positive territory, pared gains to 0.2 percent, on China's losses. South Korea's Kospi slid 3.1 percent.
Australia's S&P/ASX 200 index lost 1.2 percent, after the unemployment rate climbed to 6.3 percent in July, even as employment jumped by 38,500 since June.
However, market players keep the sentiment that Beijing will continue to buy shares to prop up the market. Goldman Sachs analysts consider that the Chinese authorities have spent up to 900 billion yuan ($144.9 billion) to buoy the stock market, equivalent to 1.6% of the market’s total capitalization and 2.2% of its free float size, or the amount of freely tradable shares.
“We believe authorities including the [central bank] are also likely to inject further liquidity if needed,” the firm wrote in a research note. “It is too early for them to reverse course, especially given the still-skittish manner in which the market is trading.”
Meanwhile, the dollar was lower against its major rivals with EUR/USD higher 0.06% to trade at 1.0912.
GBP/USD was last at 1.5627, higher 0.16%.
The pound was supported ahead of the Bank of England's policy statement. Analysts expect the bank to say that its policymakers were split over interest rates, raising expectations that it is heading for its first increase in rates in nearly a decade.
