Asia stocks trade in red as China douses risk sentiment

China's stock market crashed more than 6% on Tuesday evening, with no real explanation apart from fear that the world's second-biggest economy is slowing to quickly, sending US markets lower on Tuesday as risk sentiment diminished.

Equity markets traded mostly lower on Wednesday morning in Asia, with a sharp drop in Chinese stock prices late on Tuesday inflicting pain across markets globally. Last week China's central bank depreciated the Yuan by almost 3%, the bank's latest move to support the economy.

Japan's benchmark Nikkei 225 index fell 0.21% to 20,510.77 points within the first hour of trade, while Tokyo's broader Topix gauge crept up 0.15% to 1,669.75 points. Japan's trade deficit broadened from ¥69.0 billion in June to ¥268.1 billion last month, provisional data from the Ministry of Finance revealed on Wednesday, coming in much larger than the forecast deficit of ¥53.0 billion. Export rose 7.6% year-on-year, while imports fell 3.2%.

Hong Kong's benchmark Hang Seng index advanced 0.06% to 23,488.44 points at the opening bell, and mainland China's benchmark Shanghai Composite tumbled 2.58% to 3,651.38 points at the same time.

Korea's benchmark Kospi index fell 0.39% to 1,948.63 points this morning in Seoul.

The benchmark Australian S&P/ASX 200 index rallied 1.32% to 5,372.90 points in Sydney, reversing the previous day's losses, with resource and banking shares helping to push the markets back up.

New Zealand's benchmark S&P/NZX 50 index gained 0.53% to trade at 5,741.22 points this afternoon in Wellington. Producer prices in New Zealand continued to drop last quarter, with the input Producer Price Index (PPI) sliding 0.3% and the output PPI falling 0.2%, according to Statistics New Zealand. The main drag on both indices was dairy prices.

Last night Fonterra's Global Dairy Trade auction prices rose on average 14.5%, with whole-milk powder prices surging more than 19%. Fonterra restricted supply at the auction to help lift prices.