Investors descended into selling frenzy that propelled the Australian stock market more than 2% lower as disappointing Chinese manufacturing data added to their woes after the US Federal Reserve said it would start weaning markets off stimulus as early as September.
China’s HSBC flash manufacturing read hit a nine-month low of 48.3 for June, down on the 49.2 posted in May, extending falls across Asian bourses.
At the 1615 AEST official market close, the benchmark S&P/ASX200 index tumbled 2.12% to 4,758.4 points, while the broader All Ordinaries index lost 2.02% to 4,743.9 points.
Earlier, the benchmark plunged 2.72% to an intra-day low of 4,729 points.
IG market analyst Chris Weston said the Federal Reserve had provided a more explicit take on tapering than many investors had been positioned for.
“The equity market reaction is unjust and an over-reaction,” Mr Weston said.
“The rotation from stimulus lead growth to organic growth is never going to be smooth, but when the market works out that the Feds plan is actually a good thing then hopefully clearer heads will prevail.”
Federal Reserve chairman Ben Bernanke revealed the Fed would curb asset purchases in September, provided the economy remains on track, and wind-up the measures by mid-2014.
Financials took a battering, with the big four banks weighing heavily on the market.
Commonwealth Bank declined 3.07% $66.26, while ANZ Banking Group lost 2.47% to $27.65.
National Australia Bank shed 2.8% to $29.20 and Westpac Banking Corporation fell 3.66% to $28.16.
Investment bank Macquarie Group retreated 2.14% to $42.17.
In the insurance sector, QBE increased 5.2% to $16.18, Insurance Australia Group shed 2.86% to $5.43 and Suncorp declined 1.93% to $12.21.
In Australia, the market on Wednesday gained ground as investors took a cautiously optimistic stance ahead of the end of the Fed's policy meeting and keenly awaited update on US economic stimulus measures.
The benchmark S&P/ASX200 index was up 47.0 points, or 0.98%, at 4,861.4 points, while the broader All Ordinaries index was up 47.2 points, or also 0.98%, to 4,841.8 points.