By Willa Plank

Capital flight fears in China remain a concern for markets

Asian markets were broadly higher Tuesday, even amid concerns about capital flight from China, which has triggered a tightening of currency controls in China.

"There will be more concerns about the yuan," said Andrew Sullivan, managing director of sales trading at Haitong International Securities.

China set the yuan 0.2% weaker against the U.S. dollar Tuesday amid broad global gains for the greenback.

Tuesday's yuan fixing was the first to incorporate an expanded foreign-currencies basket, which now includes the Korean won and Saudi riyal.

Australia's S&P/ASX 200 was up 1.1%, Korea's Kospi edged up 0.9% and Hong Kong's Hang Seng Index inched up 0.7%. The Philippines PSEi was down 1.2%.

Japan's Nikkei Stock Average was closed for holiday.

Chinese stocks jumped during early trading Tuesday, buoyed by signs of economic recovery, with the benchmark Shanghai Composite up 0.7%.

China's December Caixin manufacturing PMI came in at 51.9. This was up from 50.9 a month ago, and the strongest level since early 2013 (http://www.marketwatch.com/story/china-caixin-manufacturing-pmi-strongest-since-13-2017-01-03).

That lifted the market mood, which last week was marked by selling in thin trade, said Zhang Xin, an analyst at Guotai Junan Securities.

However, the Chinese market is dogged by persistent concerns of capital flight--concerns that are evident in rounds of regulatory tweaking.

The People's Bank of China recently tightened its supervision of money transfers by individuals in China as part of its anti-money-laundering efforts.The central bank also lowered the threshold on the size of transactions that banks need to disclose to the PBOC--a move that analysts said should reduce outflows.

Speculation was also percolating over the weekend that Beijing would sharply limit Chinese citizens' ability to use their US$50,000 annual quota to convert yuan into foreign currencies, if they use the money to invest offshore or buy overseas property. The regulator responded by saying this was always the case, but clarified that it would pay more attention to enforcement of the rule.

The rules does not stop investing by Chinese in Hong Kong stocks through the Connect scheme.

Read:Bitcoin hits milestone of $1,000 on first day of 2017 (http://www.marketwatch.com/story/bitcoin-hits-milestone-of-1000-as-2017-begins-2017-01-02)

The Shanghai Stock Exchange on Tuesday halted trading of China's 50-year government bonds due to "abnormal fluctuations," shortly after its price tumbled more than 10%. The government bond due 2065 was suspended from trading between 10:36 a.m. and 11:06 a.m. Tuesday (local time) by the Shanghai exchange because of the price swing, according to a statement posted on the exchange website.

The exchange warned it would impose another halt if the security sees another similarly sharp trading move.

Hong Kong's Hang Seng Index was up 0.7%, despite selling in Macau casino shares. Sands China (1928.HK) was down 1.5% and Galaxy Entertainment (0027.HK) was off 2.4%.

Fresh data showed gambling revenue fell 3.3% to 223.2 billion patacas ($27.9 billion) last year, though revenues rose about 8% year-on-year in December.

-- Pei Li, Lingling Wei, Yifan Xie, Kenan Machado and Saumya Vaishampayan contributed to this report.

(END) Dow Jones Newswires

January 03, 2017 02:06 ET (07:06 GMT)

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