Share selloff wipes $32bn as China fears hit resources stocks
- From: The Australian
- October 04, 2011
Source: The Australian
THE Australian and Asian sharemarkets tumbled amid widespread selling pressure yesterday on deepening debt worries in Europe and concerns about China's slowing growth rate.
The local market lost about $32 billion as the benchmark S&P ASX 200 index slipped back below 4000 with fewer buyers present due to public holidays in NSW, South Australia and the ACT.The index fell 111.6 points, or 2.8 per cent, to 3897, while the broader All Ordinaries index dropped 109.4 points, or 2.7 per cent, to 3960.7.
European markets also extended their recent falls by opening more than 2 per cent lower last night.
The continued sell-off on the market has seen the local bourse shed more than $260bn of its value since the highs earlier this year. And there are growing fears the lows witnessed during the global financial crisis, which saw the index go to 3145.50 in March 2009, could be reached.
In Asia, Hong Kong's Hang Seng index slumped 4.38 per cent to a 28-month low, while Japan's Nikkei index closed 1.8 per cent lower.
The Australian dollar also hit a new 2011 low yesterday on the negative market sentiment, continuing the downward trend to close at US96.20c, down from US97.50c late on Friday, after earlier reaching a new 10-month low of US95c.
Tony Rule, UBS head of equity sales in Melbourne, said the market had opened lower off the back of a negative lead from the US on Friday, but fell further on a weak Asian market, which heightened investor concerns about China.
"The falls were across the board, but the resources sector was one of the hardest hit because of the concerns about China's growth rates," he said.
"There is a continuing theme of concern over what is going on in Europe . . . the big concern in the markets is that the big European banks are under-capitalised."
The sharp global market falls were also felt in commodities, which extended their worst quarterly loss since 2008.
The significant losses were fuelled by not only the European debt concerns but increased nervousness around China, which released data on Friday showing that its manufacturing sector shrank for a third straight month in September.
Crude oil for November delivery fell 1.4 per cent to $US78.09 a barrel on the New York Mercantile Exchange after closing last week at a one-year low. And copper dropped 2.5 per cent to $US6840.25 a tonne on the London Metal Exchange, after losing 26 per cent in the preceding three months.
The fall in the copper price saw it hit its biggest quarterly loss since the height of the financial crisis three years ago, when copper prices tumbled more than 50 per cent in the fourth quarter of 2008.
IG Markets analyst Cameron Peacock said investors were trading off speculation about the eurozone debt crisis, and ongoing fears that China's economic growth is slowing, which could hurt demand for local resources. "Copper, nickel and zinc . . . some of these industrial metals are getting hammered on talk and speculation that demand out of China is slowing and that's why we're seeing the materials and energy names being hardest hit," he said.
The world's largest miner, BHP Billiton, fell 87c, or 2.5 per cent, to $34.15 yesterday, while Rio Tinto was down 4.1 per cent to $59.30.
Turnover on the Australian market yesterday was 1.14 billion shares worth $2.9bn, less than half the usual value.
Almost nine out of every 10 stocks recorded falls.
Seven Group lost 6.92 per cent to $7.40, while Fortescue Metals Group fell 7.47 per cent to $4.09.
Australia's big four banks were also hit hard, with Westpac down 4.1 per cent at $19.50, Commonwealth Bank of Australia losing 3.7 per cent to $43.88, National Australia Bank down 3.3 per cent to $21.63 and ANZ off 3 per cent at $18.94.
Energy stocks fell, with Oil Search sinking 2.8 per cent to $5.50, Woodside Petroleum shedding 2.7 per cent to $31.62, and Santos down 2.6 per cent at $11.08.
Analysts said the Australian dollar could fall further depending on the outcome of an overnight vote in the US Senate on China's alleged currency manipulation.
Senators were to vote on a bill that aims to raise duties on Chinese imports to punish the country for allegedly keeping its currency down.
"That could stir up a hornet's nest between China and the US and that will affect global growth and commodities," said Kurt Magnus, head of foreign exchange at Nomura.
IG Market's Mr Peacock said: "The market continues to be in a state of limbo, grappling with the lingering fallouts of the global financial crisis.
"Despite best intentions, politicians and central bankers have been unable to come up with any meaningful solutions and this has in turn eroded the market's confidence that there's any light at the end of the tunnel."
Gold was the only bright spot among the carnage yesterday, as its role as a safe haven saw its price rise.
The spot price of gold late yesterday was $US1630.35 an ounce, up $US6.65 from Friday's close of $US1623.70.
The yellow metal has been sold down heavily in the past month after reaching a peak of $US1900 an ounce.
Analysts have attributed the slide to profit-taking by hedge funds and traders.
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| Company Name | Price | Change | %Change | |
|---|---|---|---|---|
| Extract Resources | 7.72 | +0.09 | UP | +1.17% |
| OceanaGold | 2.28 | +0.02 | UP | +0.88% |
| InvoCare | 6.96 | +0.06 | UP | +0.86% |
| Graincorp | 7.25 | +0.05 | UP | +0.69% |
| Bow Energy | 1.49 | +0.00 | UP | +0.33% |
| Murchison Metals | 0.28 | -0.05 | Down | -14.93% |
| Energy World Corp | 0.44 | -0.08 | Down | -14.57% |
| Gunns Limited | 0.14 | -0.01 | Down | -10.0% |
| Transpacific Industries ... | 0.57 | -0.05 | Down | -8.07% |
| Seven Group Holdings... | 7.40 | -0.55 | Down | -6.92% |
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