Australia was among the worst-performing stock markets in the Asia-Pacific region on Tuesday as resources stocks fell on the back of weaker commodity prices and investors took fright at reports of a possible rights issue by Rio Tinto.
The market largely shrugged off news that the Reserve Bank of Australia had cut interest rates to a 49-year low and signalled that the first economic downturn since 1991 was on its way.
The central bank lowered its overnight cash rate by 25 basis points to a record low of 3 per cent – the sixth reduction in eight months but the smallest since September.
The S&P/ASX 200 index fell 1.3 per cent to 3,706.30 as shares in Rio Tinto, the world’s third-biggest mining company, dropped 10 per cent to A$53.18.
Press reports stoked speculation that Rio would sell an extra $8bn of shares if Aluminum Corporation of China, or Chinalco, failed to invest in the company. Rival miner BHP Billiton shed 3.8 per cent to A$32.70.
Westpac Banking led a broad decline in the financial sector. It dropped 1.9 per cent to A$20.30, Macquarie fell by 4.9 per cent to A$29.49.
Bendigo & Adelaide Bank fell by 6.5 per cent to A$6.91, adding to Monday’s 8.2 per cent fall, after cutting its profit forecast.
Retailers did well. Woolworths rose by 1.4 per cent to A$25.57 and Wesfarmers gained 0.8 per cent to A$19.24.
Telstra, Australia’s biggest telecommunications operator, rose sharply following the federal government’s decision to seek private partners for an A$43bn high-speed national internet network.
Telstra rallied 4.4 per cent to a one-month closing high of A$3.35 as investors hoped the company would get a second chance to invest in the broadband network, after its earlier proposals were rejected.
In Tokyo, the Nikkei 225 Average closed 0.3 per cent lower at 8,832.85 although the broader Topix index ended 0.2 per cent higher at 832.60.
The Bank of Japan, as expected, left its benchmark interest rate steady at 0.1 per cent, but announced steps to ease credit stress by broadening the range of collateral it accepts for loans.
Property developers and construction companies gained on hopes that the government would spend more on infrastructure. Penta-Ocean Construction rose 5.1 per cent to Y123 and Mitsui Fudosan closed 1.6 per cent higher at Y1,297.
Carmakers seemed unworried by a recovery for the yen. Honda Motor rose 2.2 per cent to Y2,805 and Mazda, which is partly owned by Ford of the US, gained 6.6 per cent to Y227.
Weaker crude prices depressed Inpex, Japan’s biggest oil explorer, by 2.4 per cent to Y728,000. Cosmo Oil fell by 2.4 per cent to Y290.
Hong Kong drifted lower, with the Hang Seng index shedding 0.5 per cent to 14,928.97.
The main sub-index of mainland companies listed in the territory was 0.4 per cent lower at 8,772.65.
But mainland banks gained on expectations of strong profits after a big rise in lending in the first quarter of the year.
Industrial & Commercial Bank of China, the world’s biggest lender by stock market value, rose 1.7 per cent to HK$4.26 and China Construction Bank gained 1.3 per cent to HK$4.72. But, HSBC, which has just completed a £12.5bn rights issue, fell 1.6 per cent to HK$51.20.
The Shanghai Composite index closed 0.8 per cent higher at 2,439.18.
Elsewhere, South Korea’s benchmark Kospi closed 0.2 per cent higher at 1,300.10 while in Singapore, the Straits Times Index fell 2.5 per cent to 1,799.46.