Sell-off in Asia leads local bourse lower

The sharemarket has finished lower, dragged down by nervous investors taking their lead from falls in major Asian markets.

Despite small gains in early trade, Australian shares closed about 0.3 per cent lower as the Shanghai Composite, Japan's Nikkei and Hong Kong's Hang Seng indices moved into the red.

The benchmark S&P/ASX 200 dropped 13.1 points (0.28 per cent) to 4656. The broader All Ordinaries shed 17.6 points (0.38 per cent) to 4633.5.

CMC Markets sales trader Betty Lam said the Chinese markets had been "brought to their knees".

China was facing a liquidity crisis, she said, with a need for the nation's central bank to intervene to curb shadow banking, with non-banking financial bodies competing against commercial banks for traditional services.

She said China's problems, combined with last week's signalled windback of bond buying in the US, were still being felt.

"Traders have sold the Chinese indices into bear territory; fears of a Chinese credit crunch have sent a ripple effect across Asian markets," Ms Lam said. "China's story has placed downward pressure on the miners and energy-based stocks, both weighing down local equities heavily.

"Consumer staples are doing the heavy lifting for the Australian market as we see traders take flight from material-based stocks."

BHP Billiton was down 54 cents to $30.81 and Rio Tinto lost $1.30 to $50.24.

Among the banks, ANZ was flat at $27.38, CBA up 38¢ to $66.12, NAB 2¢ to $28.70 and Westpac 15¢ to $27.70.

Coles owner Wesfarmers added 57¢ to $38.60 and Woolworths 10¢ to $31.85.

Shares in Goodman Fielder gained 3.5¢ to 74.5¢ after it renegotiated its private-label bread contract with Coles.

Goldminer Newcrest's shares continued to fall as it brought in a former chairman of the corporate regulator to review its disclosure practices. Newcrest closed 23¢ (2.4 per cent) lower to $9.40.

The Australian dollar rose back above 92 US cents as investors shrugged off concerns about the Chinese central bank tightening credit rules.

At 5pm on Tuesday the dollar was trading at US92.55¢, up from US91.67¢ on Monday. The currency's dive below US92¢ was its first in almost three years.