Chinese jitters prompt $21b wipe-out
The benchmark S&P/ASX 200 Index lost 75.6 points, or 1.5 per cent, to 5010.5, while the broader All Ordinaries fell 72.4 points, or 1.4 per cent, to 5028.5. In cash terms, about $21 billion was wiped off the sharemarket.
Stocks in China suffered heavy losses after the Chinese government said it would tighten lending regulations to curb the country's rising property prices, resulting in a selloff as investors feared a potential slowdown in the world's second-largest economy.
Locally, the materials sector, consumer staples and financial stocks all burdened the market, down 3.1 per cent, 1.5 per cent and 1.1 per cent respectively.
Patersons Securities strategist Tony Farnham said the market started the day on the back foot, after a decline in base metal prices and with a large number of major stocks trading ex-dividend, including the ASX's largest stock, BHP.
BHP finished down 2 per cent to $35.57, Rio Tinto lost 3.7 per cent to $63.65 and Fortescue Metals fell 3.5 per cent to $4.37. Several other stocks trading ex-dividend were also sluggish, Brambles slipped 2.6 per cent to $8.45, Toll Holdings dipped 2.2 per cent to $5.90 and AMP fell 1.6 per cent to $5.22.
Westpac led the losses among the big four banks, dropping 2.2 per cent to $30.36. Commonwealth Bank slipped 1.1 per cent to $67.12, NAB lost 1 per cent to $30.10 and ANZ fell 0.9 per cent to $28.36.
Shares weren't helped by a further weakening of Australia's construction industry as figures from the Australian Bureau of Statistics showed building approvals had fallen 2.4 per cent in January, following a 1.7 per cent fall in December.
Woolworths finished lower, down 2.2 per cent to $34.08, while rival Wesfarmers dropped 1.2 per cent to $41.09.
The local market has several events to keep an eye on this week, with the RBA's interest rate decision on Tuesday, gross domestic product figures out on Wednesday and employment numbers on Thursday.
Internationally, discussions over the US spending cuts and Italian election results will be watched.
Meanwhile, the dollar fell to its weakest point since July last year, coming in as low as US101.16¢. It last fell below parity in June last year.
Frequently Asked Questions about this Article…
The S&P/ASX 200 fell 75.6 points (1.5%) to 5010.5 and the All Ordinaries dropped 72.4 points (1.4%) as investors reacted to heavy losses in Chinese markets after Beijing signalled tighter lending rules for property. A fall in base metal prices and a number of major stocks trading ex-dividend also weighed on the market, contributing to roughly $21 billion being wiped off local market value.
News that the Chinese government would tighten lending rules to curb rising property prices triggered a sell-off in China and fears of a slowdown in the world’s second-largest economy. That sent commodity and material stocks lower in Australia, amplifying losses across the market.
Resource majors and other large stocks fell: BHP was down 2% to $35.57, Rio Tinto lost 3.7% to $63.65 and Fortescue Metals fell 3.5% to $4.37. Other ex-dividend or large names slipped too (Brambles -2.6% to $8.45, Toll -2.2% to $5.90, AMP -1.6% to $5.22). Among the big four banks, Westpac led losses (-2.2% to $30.36), Commonwealth Bank -1.1% to $67.12, NAB -1.0% to $30.10 and ANZ -0.9% to $28.36.
When a stock trades ex-dividend it no longer carries the right to the next declared dividend, so its price often adjusts downward on the ex-dividend date. The article notes many major stocks—including BHP—were trading ex-dividend, which made them appear sluggish and added downward pressure on the market that day.
The materials sector led the decline, falling 3.1%, while consumer staples were down 1.5% and financial stocks fell 1.1%, all contributing to the overall market drop.
Yes. Australian Bureau of Statistics data showed building approvals fell 2.4% in January after a 1.7% decline in December, signalling a further weakening in the construction industry—an additional headwind for shares.
Locally, investors should watch the RBA interest rate decision on Tuesday, GDP figures on Wednesday and employment numbers on Thursday. Internationally, the market will be monitoring discussions over US spending cuts and the Italian election results.
The Australian dollar weakened to its lowest level since July of last year, falling as low as US101.16¢, and the article notes it last dipped below parity in June of the previous year.
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