Asian shares fall as China weak­ens cur­rency fur­ther

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Asian shares fell on Wed­nes­day af­ter China cut the yuan s value against the dol­lar for a sec­ond day, fuelling con­cern about the world s num­ber two econ­omy and driv­ing ex­pec­ta­tions the cur­rency could fall fur­ther.

The dol­lar de­clined slightly in Tokyo trade, af­ter ris­ing on news the Peo­ple s Bank of China (PBoC) had again re­duced the value of the yuan against the green­back, trim­ming the ref­er­ence rate by 1.62 per­cent.

Bei­jing s sur­prise de­val­u­a­tion of the yuan by 1.86 per­cent on Tues­day sent rip­ples through global fi­nan­cial mar­kets, prompt­ing a wave of selling in eq­ui­ties and com­modi­ties and hit­ting Asia-Pa­cific cur­ren­cies.

Hong Kong was down by 1.99 per­cent Wed­nes­day while Shang­hai clawed back most early losses to trade down 0.14 in mid-af­ter­noon trade.

Other re­gional mar­kets also lost ground, with Tokyo clos­ing down 1.58 per­cent, or 327.98 points, at 20,392.77, while Syd­ney ended 1.66 per­cent lower at 5,382.10. Seoul closed down 0.56 per­cent, or 11.8 points, at 1,975.47. Af­ter Tues­day s de­val­u­a­tion Chi­nese author­i­ties said they were seek­ing to push mar­ket re­forms in a one-time move.

Of­fi­cials will now use the pre­vi­ous day s close, for­eign ex­change de­mand and sup­ply and the rates of other ma­jor cur­ren­cies to de­cide the daily rate around which the Chi­nese cur­rency can trade. But in­vestors feared Bei­jing s move sig­nalled con­cern over growth af­ter week­end data showed a fall in trade and weak in­fla­tion.

"Wed­nes­day's weak fix­ing in­di­cates the PBOC wants to see fur­ther de­pre­ci­a­tion in the yuan, as yesterday s drop won t be enough to prop up China s ex­ports," Kenix Lai, a for­eign-ex­change an­a­lyst at Bank of East Asia in Hong Kong, told Bloomberg News. "Cap­i­tal will flee from China to the US due to the eco­nomic slow­down and the yuan de­val­u­a­tion."

In Tokyo share trad­ing Wed­nes­day, au­tomaker Toy­ota fell 1.66 per­cent to 7,987 yen, while Nissan, also de­pen­dent on China for sales, dropped 2.09 per­cent to 1,168.5 yen.

Com­modi­ties also lost ground on con­cerns that de­mand is set to fall in Asia s big­gest econ­omy -- a ma­jor im­porter of energy, met­als and grains -- with oil sink­ing to a six-year low. An­a­lysts said oil prices came un­der fur­ther pres­sure Wed­nes­day from news the OPEC pro­ducer car­tel raised out­put in June, adding to a global sup­ply glut, and ahead of US stocks data due later in the day.

Bhaskar Laxmi­narayan, chief in­vest­ment of­fi­cer of Pictet Wealth Man­age­ment Asia, added that a "fur­ther grad­ual ren­minbi de­pre­ci­a­tion is now likely, and other re­gional cur­ren­cies now face down­wards pres­sure".

The Hong Kong stock ex­change said its first-half earn­ings surged 73 per­cent to a record high as it reaped the ben­e­fits of a link-up with the Shang­hai bourse.

Welling­ton fell 1.12 per­cent, or 65.14 points, to 5,757.21. Spark New Zealand was 2.46 per­cent off at NZ$2.77 while Fletcher Build­ing closed 2.05 per­cent down at NZ$7.64 Taipei fell 1.32 per­cent, or 110.76 points, to 8,283.38. Tai­wan Semi­con­duc­tor Man­u­fac­tur­ing Co. dropped 1.53 per­cent to Tw$ 128.50 while Hon Hai Pre­ci­sion In­dus­try lost 2.26 per­cent to Tw$86.50. Bangkok was closed for a public hol­i­day.

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