ASX Falls on Weak Chinese Economic Data

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News of China’s continuing slowdown made a big impact on the local share market today. The ASX plunged more than 2% near close of trade, falling below 5000 points.

The ASX was down 106 points, to 4,997, at 4:00pm. The All Ords plunged 1.94%, down 99 points to 5,031.

The selloffs were broadly in line with other Asian markets. The Hang Seng was down 2.96% for the day. The Shanghai Composite Index shed 1.78% of its value. Japan’s Nikkei too was down 1.96% for the day.

All plunged for the same reason.

Big news out of China showed factory output falling yet again in August. The PMI index revealed Chinese manufacturing contracted for the seventh month straight.

Worst of all the figures were at their worst level in six years. The last time Chinese factory output was this bad was in 2009, during the height of the GFC.

Major ASX sectors all down

As expected, resource stocks came under most pressure. At 4:00pm, BHP [ASX:BHP] was down almost 5%, at $22.73. It hasn’t seen shares drop this much since 2008.

Rio Tinto [ASX:RIO] fared a bit better. It’s share price was down 2.58% to $47.92 a share.

Smaller cap mining stocks were even worse hit. Fortescue [ASX:FMG] is down 5.38% to $1.81 a share.

BHP’s spinoff, South32 [ASX:S32] was down 6.3% to $1.40 a share.

Across the energy sector, major stocks were all down for the day.

  • Woodside [ASX:WPL] fell 2.83% to $28.81
  • Santos [ASX:STO] fell 1.8% to $4.90
  • Origin [ASX:ORG] fell 1.8% to $6.73

Yet it wasn’t just commodity and energy stocks feeling the brunt. The banking sector was also down across the board.

  • Westpac [ASX:WBC] fell 3.6% to $29.98
  • ANZ [ASX:ANZ] fell 3.1% to $26.98
  • Commonwealth Bank [ASX:CBA] fell almost 3% to $71.64
  • NAB [ASX:NAB] fell 2.29% to $29.81

Australia’s banking sector isn’t directly exposed to China’s slowdown. But it’s affected by what this slowdown says about Australia’s own growth prospects.

The banking selloffs are a sign investors are concerned about our own economic growth.

This extends to the retailing sector too. Anything affecting economic growth impacts retailers own sales forecasts.

The worst hit today was Harvey Norman [ASX:HVN]. Its stock was down 4.65% to $3.80.

In all it was a day of carnage on Asian markets.

At 5:00pm AEST, European markets will reopen. Yesterday, French, German and British exchanges were down by over 3% each. The manufacturing data won’t help European markets as trade resumes.

Expect Germany, Europe’s export engine, to come under most pressure.

Mat Spasic,

Contributor, The Daily Reckoning

PS: The Aussie share market had its worst month since 2008 in August. The ASX lost 9% of its value, shedding more than $70 billion.

The Daily Reckoning’s Vern Gowdie saw this coming. He predicted the current market correction at the beginning of the year. But Vern says we haven’t seen the worst of it yet.

He’s convinced the ASX will lose as much as 90% of its market cap in the coming months. As China’s economic slowdown picks up pace, volatility will follow.

Vern is the award-winning Founder of the Gowdie Family Wealth and The Gowdie Letter advisory services. He’s ranked as one of Australia’s Top 50 financial planners.

Vern wants to help you avoid this coming wealth destruction. That’s why he’s written this free report ‘Five Fatal Stocks You Must Sell Now’. As a bonus, Vern will show you which five blue chip Aussie companies could destroy your portfolio.  You almost certainly own one of them…

To find out how to download the report, click here.

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