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Update: Asia: Stocks mixed on US rate talk, China fears

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Asian markets were mixed on Wednesday, buoyed by a possible US interest rate hike even as China's ability to stem a recent market rout weighed on sentiment.

[HONG KONG] Asian markets were mixed on Wednesday, buoyed by a possible US interest rate hike even as China's ability to stem a recent market rout weighed on sentiment.

The dollar advanced against other major currencies after a US Federal Reserve official expressed support Tuesday for lifting interest rates at the central bank's September policy meeting.

Tokyo put on 0.23 per cent, Hong Kong added 0.13 per cent, Shanghai fell 0.26 per cent, Seoul was flat and Sydney shed 0.70 per cent.

Dealers were reacting to Federal Reserve Bank of Atlanta President Dennis Lockhart's statement that he supports lifting rates in September barring an unexpected stumble in the economy.

In Shanghai, investors took profits after strong gains the previous day sparked by new restrictions on short-selling.

The Shanghai and Shenzhen exchanges said investors who borrow shares must wait until the next day to repay the loans, instead of settling the same day as under previous rules.

Short-selling - a bet that the price of a stock will fall - requires investors to borrow the stocks they do not own to carry out the deal, so obliging them to maintain their positions overnight exposes them to greater risk.

Traders were also taking note of a International Monetary Fund declaration Tuesday that "significant work" needs to be done in reviewing the inclusion of China's currency in its basket of "special drawing rights" reserve currency.

The Chinese government is seeking to expand use of the yuan, also known as the renminbi (RMB), by having it included in the SDR, an international reserve asset that currently is comprised by four currencies: the dollar, euro, pound and yen.

Tokyo ticked up after a brief slide in opening trade, rising on positive earnings reports and a weaker yen, but analysts advised caution.

"The overseas environment will continue to be a drag on the market," Hiroichi Nishi, a manager at SMBC Nikko Securities in Tokyo, told Bloomberg News.

"Lockhart's comments made the market wary of rate hikes once again. Caution toward the Chinese economy continues to weigh on the market as well." US stocks ended lower Tuesday following a mixed batch of earnings reports and a fall by Apple of 3.2 per cent, leaving it down more than 12 per cent since its July 21 earnings release.

The Dow Jones Industrial Average dropped 0.27 per cent.

AFP