China’s devaluation of the yuan hit markets across Asia for the second straight day, with currencies like the Malaysian ringgit and Philippine peso hitting fresh multi-year lows and stocks in Japan and Hong Kong falling hard.
In Japan, the Nikkei 225 index plummeted 327.98 points, or 1.6%, to 20,392.77
In Hong Kong, the Hang Seng Index collapsed 582.19 points, or 2.4%, to 23,916.02
The losses across Asia come after the yuan’s fall rattled global markets overnight. Investors worry that the yuan devaluation shows that China’s economic slowdown may be more severe than the government has been willing to admit through data, and that demand for dollar-denominated commodities will fall in a country that is the top consumer of many raw materials.
Southeast Asian currencies have been among the worst hit this year as the region’s economies sputter and the U.S. dollar rises ahead of an expected increase in interest rates later this year. A weaker yuan is expected to pressure central banks in the region to devalue their currencies to keep their economies competitive against China’s.
The South Korean won, one of the hardest-hit currencies in Asia yesterday, fell another 1% to trade at 1,189 against the U.S. dollar, a fresh low since 2012. The Australian dollar and New Zealand dollar were each down more than 0.5% against the U.S. dollar.
CHINA
In China, the CSI 300 dropped 50.54 points, or 1.2%, to 4,016.13.
The Chinese yuan fell 1.6% against the U.S. dollar after the country’s central bank set its daily reference rate to the U.S. dollar down 1.6% on Wednesday from Tuesday’s rate.
The move came after China surprised international markets yesterday by setting the rate 1.9% lower from the previous day’s, saying it would take into account the closing market level when guiding its currency. The onshore yuan is allowed to trade in a 2% band around the bank’s fixing.
The Chinese government continues to buy domestic stocks to support the market after a massive selloff between mid-June and early July. Investors continue to expect monetary easing measures that could help lift stocks amid a slowing domestic economy.
In other markets
In Singapore, the Straits Times Index slouched 91.57 points, or 2.9%, to 3,061.49
In Taiwan, the Taiex index subtracted 110.76 points, or 1.3%, to 8,283.38
In Korea, the Kospi index lost 11.18 points, or 0.6%, to 1,975.47
The NZX 50 dipped 65.13 points, or 1.1%, to 5,757.22
The ASX 200 Index fell 91.15points, or 1.7%, to 5,382.08
