Hong Kong: Asian shares were mixed on Tuesday, with Shanghai and Hong Kong boosted by news China's central bank is devaluing its currency while other regional markets fell. Tokyo closed down 0.42 per cent, or 87.94 points, at 20,720.75 while Sydney fell 0.65 per cent, or 35.96 points, to close at 5,473.2. South Korean shares fell 0.82 per cent after disappointing earnings, with the benchmark KOSPI index ending down 16.52 points at 1,986.65. But Shanghai had added 0.83 per cent in mid-afternoon trade while Hong Kong was up 0.71 per cent.
China on Tuesday announced a sharply lower daily reference rate for the yuan against the US dollar, saying it was part of moves to make its exchange rate regime more market-oriented. The 1.86 per cent cut - the largest since the Yuan was unpegged from the greenback in 2005 - comes as speculation mounts China is preparing to widen its currency trading band for the first time since March 2014. Weak trade and inflation data released last weekend reinforced concerns that growth is slowing in the world's second largest economy.
"The yuan's weakness helps with exporters and improves the economic outlook as well," Castor Pang, head of research at Core-Pacific Yamaichi, told Bloomberg News. "The currency will depreciate in (the) short-term, reflecting weakness in internal economic momentum." The news drove Hong Kong shares higher, with PetroChina and Jiangxi Copper surging more than three percent, leading gains for energy and resources companies.
But fears a weaker Yuan could hurt airlines' profits hit their shares hard, with China Southern Airlines losing 17.3 per cent to HK$6.82 while Air China sank 13 percent to HK$7.40. China Eastern Airlines lost 12.7 per cent to HK$5.70. News of China's move sent ripples through Asia's currency markets, pushing the Australian dollar -- often seen as a proxy for the Yuan - down 1.23 per cent to 73.22 US cents. The US dollar gained against the yen, trading at 124.92 compared with 124.72 in New York on Monday, along with gains against the South Korean won and Indian rupee.
Bearish for commodities
The People's Bank of China's announcement "looks to be a move to a more open market policy", Stephen Innes, a senior trader at OANDA, told Bloomberg News. "Traders are looking for US dollar strength across the Asia region and pressure on all local currencies." The euro dipped after news that Greece has reached an agreement with its creditors on fiscal targets, leaving it on course for a bailout deal to avert an August 20 default.
The single currency changed hands at $1.0985 and 136.91 yen against $1.1019 and 137.31 yen. The Yuan move was also seen as bearish for commodities, as it could make it more expensive for buyers in China - a major importer of metals, grains and energy -- to pay for dollar-denominated goods. "The depreciated Yuan will reduce resources imports by China," Ren Gang, vice general manager at Qingdao Youbangyuan Trading, told Bloomberg News. "That's bearish news for global commodities but could help China squeeze its capacity glut."
Oil prices were also under pressure as dealers eyed the latest US energy report for clues about demand in the world's top crude consumer. US benchmark West Texas Intermediate for September delivery fell 31 cents to $44.65 while Brent crude for September eased 21 cents to $50.20 in afternoon trade. Safe-haven gold fetched $1,101.38 compared to $1,094.78 late Monday. Shanghai stocks surged Monday on news Beijing is making fresh moves to support equities, and on hopes of an overhaul of the country's inefficient government-backed companies.
Beijing has unleashed an unprecedented wave of measures to stop a rout in its share markets, moves which central bank data showed Tuesday had driven up bank lending some 17 per cent to 1.48 trillion yuan between June and July. Asian shares got a strong lead from Wall Street Monday, where a rise in oil prices propelled petroleum-linked stocks higher while news Berkshire Hathaway will buy Precision Castparts for $37.2 billion cheered investors.
The Dow Jones Industrial Average gained 1.39 per cent, the broad-based S&P 500 jumped 1.28 per cent, and the tech-rich Nasdaq Composite Index advanced 1.16 per cent. In other markets: - Wellington ended down 0.73 percent or 42.67 points at 5,822.35. Spark New Zealand fell 2.41 per cent to NZ$2.84 while Air New Zealand gained 0.19 per cent to NZ$2.695. - Taipei fell 72.70 points, or 0.86 per cent, to 8,394.14. Fubon Financial Holding lost 2.41 per cent to Tw$56.8 while Nan Ya Plastics Corp shed 3.44 per cent to Tw$61.8.
