Australian stocks close sharply lower as fears over China persist

The longest losing streak since 2010 has wiped more than $100bn off the local market in only seven sessions.

Investors watch the market indicator boards at the Australian Stock Exchange (ASX) in Sydney. Picture: Britta Campion. The Australian.

The Australian sharemarket hit its weakest point in more than two years before closing substantially lower, booking its worst losing streak in more than five years.

Local investor nerves were not relieved by a strengthening of the Chinese yuan during the day’s trading session, in which the local bourse dived as much as 2.2 per cent to touch its lowest level in two-and-a-half years.

But the sharemarket pared some of its losses, and at the 4.15pm (AEDT) official market close, the benchmark S&P/ASX200 index was down 58.6 points, or 1.17 per cent, at 4932.2, while the broader All Ordinaries index had retreated 58.7 points, or 1.16 per cent, to 4990.7.

Monday’s close sees the ASX seal a seven-day losing streak, which it hasn’t done since June 2010, after entering territory not seen since July 2013. The ASX200 has now lost around 7 per cent so far this year, erasing more than $100 billion in market value.

Global investors have been rattled by instability on the Chinese stock market, with Australian markets hit particularly hard thanks to the nation’s exposure to the Chinese economy.

The People’s Bank of China set the midpoint for the yuan sharply stronger for a second day, reversing the trend last week which saw the currency’s biggest weakening in five months. The move confounded analysts and failed to offset market jitters, with the Shanghai Composite index dropping as much as 3 per cent.

“Different signals about FX policy have wrong footed market participants and we are wary in believing that an immediate calmness will soon emerge,” HSBC exchange researcher Paul Mackel said.

Mining and energy stocks on the local exchange were hammered, with pain exacerbated by an overnight rout in oil prices, with global benchmark Brent crude tumbling to a new 12-year low of $US33.55 a barrel.

“There are still concerns regarding future demand for Australian commodities,” Atlantic Pacific Securities adviser Gary Huxtable said. “Coupled with the devaluation of China’s yuan, there is little incentive for investors to try and pick the bottom of the current cycle,” he said.

BHP Billiton, down around 55 per cent over the last twelve months, dived below $16 a share to a new 11-year low.

BHP closed 4.89 per cent weaker at $15.55, while rival Rio Tinto fell 3.34 per cent to $40.50.

Energy stocks were slugged. Woodside Petroleum lost 2 per cent to $27.63, while Santos fell 5 per cent to $3.21.

Origin Energy was off 4.28 per cent to $4.25 despite confirming its first APLNG shipment.

The financials were also heavily sold-off, with NAB and ANZ both touching three-year lows.

ANZ was 1.53 per cent lower at $25.15, while NAB dropped 1.08 per cent $27.42.

Macquarie was shafted, diving 3.38 per cent to $74.30

Commonwealth Bank eased 0.98 per cent to $78.64, while Westpac gave up 1.42 per cent to $30.56.

Consumer staples held largely steady with the supermarkets seeing subdued trade. Wesfarmers edged up 0.25 per cent to $39.75, while Woolworths was flat at $22.87.

Meanwhile, Telstra climbed 0.19 per cent to $5.31, while Qantas dipped 1.97 per cent to $3.98.

The Australian dollar plunged to a four-month low over the weekend, sliding below US70c.

“If it continues to fall, the Australian dollar will be entering a new era of being quoted with a ‘6’ in front and trading at levels not seen for seven years,” OANDA foreign exchange analyst Stuart McPhee said.

“This will potentially change the economic landscape for Australia in 2016 and be a leg up for the Reserve Bank of Australia’s efforts,” Mr McPhee said.

Macquarie researchers were bullish on the medium-term prospects for the local market however, forecasting the ASX200 to 5900 points by the year’s end, implying a 20 per cent rise from the current level near 4900 points.

Ord Minnett analysts meanwhile matched the prior forecasts of Deutsche Bank, expecting the ASX to advance to 5500 points, implying a gain of around 10 per cent by December 2016.

Looking ahead, tomorrow Whitehaven Coal releases quarterly production figures while the official jobless rate is announced on Thursday.