Local stocks take $38bn hit as RMB roils global markets

The ASX has suffered its worst session of the year as concerns China is weaponising its currency wreak havoc.

A person is reflected in a window as stock prices are seen at ASX in Sydney. Picture: AAP

Trade war fears and concerns that China is weaponising its currency have wiped $38 billion in value off the market on Monday, amid a broad regional sell-off.

The benchmark ASX200 closed the session near its lowest level for the day, down 128 points or 1.9 per cent to 6640.3, to clock its worst slump since the December 10 fall of 2.27 per cent.

Meanwhile, the All Ordinaries finished lower by 136 points or 2 per cent to 6710.6.

Stocks had been trading down by a mild 0.3 per cent at the open, but accelerated its losses once Asian markets came online.

The Asian sell-off came as the Chinese yuan hit its weakest levels against the US dollar since 2008, fuelling concerns that Beijing was allowing currency depreciation to counter the US tariff threat.

Both the onshore and offshore yuan pushed past the key 7 per dollar resistance, sparking commentary from the People’s Bank of China that the currency had been “affected by unilateralism and trade protectionism measures”.

Julian Evans-Pritchard, senior China economist with Capital Economics, said the PBOC has “effectively weaponised the exchange rate” by linking the currency with the US trade war.

“Given that their goal is presumably to offset some of the impact from additional US tariffs, they are likely to allow the currency to weaken further, probably by 5 to 10 per cent over the coming quarters,” he said.

At the close of local trade, China’s Shanghai Composite was lower by 1.27 per cent while the Hang Seng had lost 2.91 per cent to its lowest levels since January.

Local iron ore miners were hit as iron ore futures fell back below the $US100 per tonne mark.

BHP lost 3.61 per cent to $37.38, Rio Tinto slid by 3.46 per cent to $91.49 while Fortescue shares were hit by 7.2 per cent to 47.09.

Meanwhile, Commonwealth Bank traded 0.82 per cent lower to $81.21 ahead of its full year results announcement on Wednesday.

Westpac lost 1.21 per cent to $28.47, ANZ gave back 1.73 per cent to $27.31 and National Australia Bank fell 1.26 per cent to $28.15.

Technology stocks were the hardest hit in today’s sell-off — the sector down 5.2 per cent at the close.

Key WAAAX stocks were among some of the biggest losers – WiseTech fell 8 per cent to $29.30, Afterpay retraced by 7.81 per cent to $23.50, Altium fell 6.30 per cent to $33.45, Appen lost 10.61 per cent to $26.87. Xero fared best, with a fall of 2.88 per cent to $63.80.

Investors flocked to safe-haven assets, sparking a boost in gold futures to touch a six-year high of $US1467.4 an ounce and helping local gold miners higher.

Evolution Mining added 1.94 per cent to $5.25, Resolute added 4.30 per cent to $1.94, Saracen Minerals edged higher by 0.89 per cent to $4.53 while St Barbara gained 1.1 per cent to $3.69.

REITs too saw some defensive buying – Abacus Property gained 0.48 per cent to $4.20 while Charter Hall outperformed the market with a loss of just 1.1 per cent to $11.68. Unibail Rodamco Westfield was one of the better performers with a 1.22 per cent boost to $9.97.

In equity news, Oil Search was boosted by news the Papua New Guinea government would back its Papua LNG project. Its shares were among the market’s best performers, finishing up 2.88 per cent to $7.14.

Wesfarmers gained 0.77 per cent to $39.16 after the competition regulator gave it the green light to buy online retailer Catch Group.

Fintech Credible leapt 6.31 per cent to $2.19 after announcing it had entered into a $585m takeover deal with Fox Corp, valuing shares at $2.21 apiece.

The Australian dollar finished the session down 0.4 per cent to US67.69c while Australian 10-year bond yields closed near record lows at 1.025.