Shanghai stocks claw up but investors on edge

By Eric Burroughs

HONG KONG (Reuters) - Chinese shares clawed back up on Thursday after a two-week sell-off, giving a boost to Asian stock indexes and commodities, but many investors were nervous that the Shanghai slide may have more room to run.

The benchmark Shanghai Composite Index was up 1.5 percent, helped by reports that the stock regulator had approved new mutual funds this week to help underpin the market that has slid nearly 20 percent since hitting a 14-month high earlier in the month.

But Chinese shares surrendered some gains after jumping nearly 3 percent at one point, showing that the market remains highly volatile.

The gains helped give a lift to other regional shares that have been battered by sudden slumps in Shanghai this month.

Japan's Nikkei average was up 0.7 percent, while the MSCI benchmark of Asia-Pacific shares outside Japan gained 1 percent.

Shanghai's impact on global markets has surprised analysts but has been taken by some as a worrying sign about the outlook for the Chinese economy, which has been among the strongest to power out of the worst global downturn in decades.

Patrick Bennett, Asia FX and rates strategist at Societe Generale, said the fact that Chinese shares were having such a big influence on other markets felt like "intellectual piracy", but showed how edgy investors are on the global outlook.

"That such is occurring does tell us of the fragility of risk sentiment," Bennett said in a note to clients.