Stocks add to losses on China data

THE sharemarket has lost ground for a fourth straight day, slipping below 4100 points yesterday after a sharp slowdown in Chinese imports fanned concerns about global growth.

By InvestSMART · 11 Jul 2012

By InvestSMART ·
11 Jul 2012

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THE sharemarket has lost ground for a fourth straight day, slipping below 4100 points yesterday after a sharp slowdown in Chinese imports fanned concerns about global growth.

A day after Iluka Resources took a battering from shareholders for reporting poor second-quarter sales, the resource sector again weighed heavily, with BHP Billiton slipping 26? to $31.22 and Rio Tinto losing 44? to $56.10.

As investors ditched stocks considered risky, the big banks were also down and media shares performed poorly.

The benchmark S&P/ASX 200 Index lost 20.3 points, or 0.5 per cent, to 4098, contributing to the sharemarket's longest losing streak in five weeks.

Trading started positively, even though shareholders were aware that Spanish 10-year bond yields had flared up again, touching a dangerous 7 per cent, a painful reminder that Europe's debt crisis has a long way to run.

But things turned sour when trade data showed China's surplus had hit a three-year high of $31.7 billion in June after import growth slowed much more than expected.

Import growth was just 6.3 per cent, which was half the previous month's level and below the consensus 11 per cent, while exports grew by 11.3 per cent, down from 15.3 per cent in May.

Chinese imports of iron ore the most important Australian export declined by 9 per cent in the month.

On a day when volumes were again extremely light, the falls in resource stocks were bound to weigh on the market.

"The weak import growth adds fuel to the argument of slowing investment and domestic activity within China," said IG Markets analyst Cameron Peacock. "[That] had a predictable negative impact on the share prices of our major miners."

Ten Network and Seven West Media touched record lows. Ten lost 0.5? to end the day at 47? after earlier brushing 46?. Seven West Media closed at $1.59 after hitting a low of $1.56, its cheapest since listing in July 2009.

Myer slumped 12.5?, or 6.9 per cent, to $1.675.

Among the banks, NAB lost 12? to $23.55, ANZ 16? to $22.34, CBA 34? to $53.44 and Westpac 4? to $21.56.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket fall for a fourth straight day?

The ASX fell after China’s trade data showed a sharp slowdown in import growth, stoking fears about global growth. The S&P/ASX 200 lost 20.3 points (about 0.5%) to 4,098 as resource stocks, banks and media shares were sold off following the weaker-than-expected Chinese numbers.

How did the June China trade data specifically hit Australian stocks?

China’s surplus rose to US$31.7 billion in June as import growth slowed to 6.3% (well below the consensus 11%) while exports rose 11.3%. Weaker Chinese imports — including a 9% drop in iron ore shipments — dent expected demand for Australian commodity exports and pressured major miners’ share prices.

Which ASX sectors were worst affected by the market move?

The biggest hits were in the resource sector, which weighed heavily on the market, alongside big banks and media stocks. The article notes miners slid after the China data, banks closed lower, and media companies touched record lows.

What happened to major miners like BHP and Rio Tinto during the sell-off?

Major miners were down on the day: BHP Billiton slipped to around $31.22 and Rio Tinto fell to about $56.10, as commodity-sensitive stocks reacted to weaker Chinese import demand and lighter trading volumes.

How did Chinese iron ore import weakness affect Australian miners?

Chinese iron ore imports — Australia’s most important export — declined by 9% in June. That drop amplified concerns about slowing Chinese investment and domestic activity, which analysts say had a predictable negative impact on the share prices of Australia’s major miners.

Which media and retail stocks were mentioned as underperforming?

Ten Network and Seven West Media touched record lows; Seven West closed at $1.59 after hitting $1.56. Retailer Myer also slumped, falling about 6.9% to $1.675 during the session.

Did anything else besides China data influence the market that day?

Yes — trading volumes were extremely light, and European debt worries also lingered: Spanish 10-year bond yields had spiked toward 7% earlier in the session, a reminder that Europe’s debt crisis remained a risk factor for global markets.

What should everyday investors watch after this market drop?

Monitor incoming China trade and import data (especially iron ore flows), updates from major miners and resource companies, bank earnings or sector news, trading volumes for signs of conviction, and broader global risks such as European bond yields — all of which were highlighted as influences on the market in the article.