Asia markets were broadly lower on Tuesday. Chinese markets, however, made a partial recovery after declines in the previous session that followed the country's central bank cutting the reserve requirement for banks over the weekend. The Shanghai composite rose by 0.17 percent to close at around 2,721.02 while the Shenzhen composite lost its earlier gains to end largely flat at about 1,385.09.

Behind the Chinese market moves

The People's Bank of China (PBOC) said on Sunday that it was cutting the amount of cash that banks have to hold as reserves by 100 basis points, effective Oct. 15. The reserve requirement ratio (RRR) is currently 15.5 percent for large commercial banks and 13.5 percent for smaller lenders. The move from the PBOC came amid concerns about the economic impact of Beijing's ongoing trade war with Washington. "China's latest RRR cut of the year has not managed to boost the confidence," Huani Zhu from Mizuho Bank wrote in a Tuesday morning note. "Despite several rounds of RRR cuts, onshore credit condition remained somewhat tight, especially for (small and medium enterprises)." Zhu explained that compared to the state-owned firms, private companies and SMEs were more likely to be hit the hardest in the protracted trade conflict with the U.S., given "less robust exports prospect, rising financing cost and softening sentiment." Commenting on the impact of the move by the Chinese central bank on the slide seen in the mainland markets yesterday, BlackRock's Head of China Equities Helen Zhu told CNBC's "Squawk Box": "I don't think the reaction was really to the PBOC move."

Instead, Zhu pointed to the sudden increase in U.S. rates last week, which "spur concerns that (the) U.S. dollar will continue to strengthen," putting pressure on the yuan and other emerging market currencies as a result. She also said a speech from U.S. Vice President Mike Pence last week was "more hawkish than what people had previously anticipated." Pence had accused China last week of "malign influence and interference," saying that the country was waging a sophisticated effort to sway the elections against the Republicans in retaliation for U.S. President Donald Trump's trade policies, according to a Reuters report. China's on-shore was at 6.9203 against the dollar as of 3:06 p.m., near similar levels as the off-shore currency. Before the market opened, the PBOC set the yuan mid-point at 6.9019 against the greenback, which was a bit weaker than a Reuters estimate of 6.8943 per dollar.

Track markets across the region

The rest of Asia was mostly lower, following a mixed finish on Wall Street. Australia's ASX 200 was down by 0.97 percent to close at 6,041.1 as the heavily weighted financial subindex fell 0.87 percent. Major banking names were lower, with Commonwealth Bank shares declining 0.87 percent. The lender said on Tuesday that it will unwind a controversial system of charging customers commissions on financial products, according to Reuters. The changes were sparked by damaging revelations from an inquiry into financial sector misconduct, the news wire reported. Japan's closed lower by 1.32 percent at 23,469.39 and the Topix index fell 1.76 percent to end the trading day at 1,761.12. As of 2:56 p.m. HK/SIN, Hong Kong's continued to beat the general downward trend to trade slightly stronger despite losing its earlier gains. South Korea's markets were closed for a public holiday.

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