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Asia: Markets tread water ahead of China trade release

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[HONG KONG] Asian investors moved cautiously in early exchanges on Tuesday as they await the release of closely watched Chinese trade data, with fears another weak reading will fuel more global market volatility.

Analysts said the recent turmoil in international markets caused by worries over China - and uncertainty over US interest rates - had left investors nervous, with stock markets moving within a tight band and safe-haven assets such as the yen edging up.

News that Japan's economy had contracted less than expected was also unable to provide a buying impetus in Tokyo's Nikkei, despite speculation the country's central bank will likely have to unveil fresh monetary easing measures, which usually supports stocks.

"While there are opportunities out there, there's no rush to pick the bottom at this stage given prevailing uncertainties over the slowdown in the Chinese economy and the timing of the US interest-rate increase," Tim Schroeders, a portfolio manager at Pengana Capital, told Bloomberg News.

"Investors probably want to sit tight and watch developments closely," he said.

The focus was on Beijing, with the trade figures the first in a string of data this week that will be used as a barometer of the state of the Chinese economy, the world's second-biggest and a crucial driver of global growth.

Ahead of the data release Shanghai was down 0.24 per cent, Hong Kong added 0.55 per cent and Tokyo shed 0.76 per cent. Sydney, where several firms with key links to China are listed, was up 1.05 per cent after a recent sell-off.

JAPAN DATA 'HARDLY REASSURING

Stock markets have been convulsed for weeks by the endless run of weak data out of China, with trillions wiped off companies values around the world on fears the country is heading for a "hard landing".

On Monday Beijing revised down its original reading for growth in 2014 to 7.3 per cent, its slowest rate in a quarter of a century.

Adding to nervousness on trading floors is the US Federal Reserve's looming decision on whether or not to hike interest rates - a move that would tighten borrowing costs and investment opportunities.

The central bank's call, expected later this month, has been muddied by the China crisis as well as a disappointing jobs report on Friday.

Japan on Tuesday said the world's number-three economy shrank less than expected in the April-June quarter, although analysts said the figures were unlikely to ease pressure on the central bank to widen its bond-buying stimulus programme, which effectively prints money.

While the 0.3 per cent contraction was better than the 0.4 per cent first announced and the 0.5 per cent forecast by markets, Marcel Thieliant, Japan economist at Capital Economics, said "the details were hardly reassuring." "The upward revision was mostly due to a larger contribution from stock building," he added.

"We stick to our view that the Bank of Japan will step up the pace of easing at its end-October meeting."

Tokyo is struggling to kickstart growth in the economy, despite a vast spending blitz and monetary easing drive to light a fire under prices and end almost two decades of painful deflation.

Despite talk of more yen being pumped into financial markets, the Japanese unit was slightly higher with dealers reticent to buy riskier assets.

In Tokyo forex trade, the dollar stood at 119.25 yen, compared with 119.34 yen in Tokyo Monday afternoon.

AFP