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The share market suffered its biggest blow in almost seven months, sinking 2.1 per cent as this year’s rally in mining stocks continued to unravel.
The S&P/ASX 200 dived 155.5 points per cent to 7248, closing below 7300 for the first time since July 21.
Today’s decline was the heaviest since a 161-point slump in late February. The index has fallen 381 points or 5 per cent since last month’s record high.
Just 11 companies on the ASX 200 advanced. BHP, Rio Tinto and Fortescue Metals plumbed fresh 2021 lows. AusNet and ALE Group jumped on takeover announcements.
What moved the market
Iron ore traded below US$100 in Singapore today, less than half the US$230 a tonne the steel-making ingredient commanded as recently as May. Prices have imploded as China seeks to cool an over-leveraged property market, imposes environmental curbs ahead of the Winter Olympics and struggles with sporadic Covid outbreaks.
The impact on the ASX’s big three producers has been devastating. Fortescue Metals traded at a 14-month low this morning before paring its loss to 3.73 per cent. Since their July high, shares in Andrew Forrest’s “third force” have tumbled 46 per cent.
BHP and Rio Tinto have broader income streams, but both traded at their weakest since November. BHP shed 4.16 per cent. Rio Tinto gave up 3.6 per cent.
Today’s falls happened as the slow implosion of China’s second-largest property developer cast a long shadow. Evergrande shares dived more than 19 per cent to an 11-year low ahead of deadlines for repaying debt. The decline helped pull Hong Kong’s Hang Seng index down 3.2 per cent to its lowest in 11 months. Other property stocks fell amid contagion fears.
“The central government’s priority of social stability makes restructuring likely with haircuts for debt holders, but spillovers to other listed property developers means there will likely be a real economy impact on the real estate sector. To what extent Evergrande slows the growth momentum remains unclear,” Tapas Strickland, NAB Director, Economics, said.
US equity futures also sank, suggesting further weakness following falls on Friday. S&P 500 futures dropped 33 points or 0.74 per cent. On Friday, the US benchmark shed 0.91 per cent.
Winners’ circle
Energy distribution network AusNet jumped 19.19 per cent to a record after suitor Brookfield Asset Management raised its offer a third time to $2.50 a share. Today’s non-binding, indicative offer represented a 26 per cent premium to AusNet’s closing price on Friday.
In the absence of a superior offer, the AusNet board said they would unanimously recommend a binding offer at the new price. Brookfield will be allowed to conduct due diligence on an exclusive basis. The asset manager previously made non-binding offers of $2.35 and $2.45.
ALE Property Group, Australia’s largest portfolio of freehold pubs, jumped 20.85 per cent to $5.68 after Charter Hall Long WALE REIT (CLW) and superannuation fund Host Plus agreed to buy the group for a mix of cash and shares. ALE security holders will receive 0.408 CLW shares, plus cash of $3.673 per share, as well as a distribution of 5.5 cents. CLW shares dipped 3.03 per cent.
Transurban announced it and its partners will buy out the NSW Government’s 49 per cent stake in the WestConnex Sydney toll road for $11.1 billion. Shares in the toll road operator entered a trading halt while it taps investors for $4.2 billion to help fund the purchase. Transurban will own 50 per cent of the asset in partnership with AustralianSuper, Canada Pension Plan Investment Board and Tawreed Investments.
Havens were scarce. Coles was the only stock on the ASX 20 index of heavyweights to advance, inching up 0.18 per cent.
On the wider market, Nufarm gained 2.05 per cent, Healius 0.81 per cent and Auckland International Airport 1.1 per cent. Tyro Payments debuted on the ASX 200 with a rise of 0.49 per cent. Spark New Zealand added 0.43 per cent, GUD Holdings 0.39 per cent and Boral 0.33 per cent.
Doghouse
Most of the session’s biggest losers on the ASX 200 were miners. Champion Iron gave up 12.33 per cent, Lynas Rare Earths 11.8 per cent, Pilbara Minerals 9.61 per cent and Nickel Mines 8.72 per cent. Z1p Co and Seven West Media prevented a clean sweep of the top ten by mining stocks, falling 6.73 and 6.59 per cent, respectively.
A rally in uranium stocks hit a brick wall. Sharp declines in major producers in the US prompted a bout of profit-taking. Vimy Resources shed 20.75 per cent, Alligator Energy 19.05 per cent, Deep Yellow 18.61 per cent and Gladiator Resources 18.18 per cent.
G8 Education fell 3.81 per cent on news it will acquire in-home childcare and NDIS services provider Leor for $2 million up-front, and up to $9.5 million in total if earnings targets are met. G8 said the acquisition would offer an entry into the “underserved in-home child care and specialised NDIS segments for children”.
While the miners bore the brunt of the selling, the broader market also weakened. The big four banks shed between 2 and 2.3 per cent. Aristocrat Leisure gave up 2.9 per cent, Woodside 2.51 per cent and Afterpay 2.17 per cent.
Other markets
Oil faded with US equity futures. Brent crude sagged 43 US cents or 0.57 per cent to US$74.91 a barrel.
Gold reversed early weakness to trade flat at US$1,71.40 an ounce.
The dollar reversed early gains amid a wider retreat from risk. The Aussie dropped 0.32 per cent to 72.4 US cents.
