Australian Stocks Sink to Two-Year Low on China Economy Concern

Australian stocks slumped to a two-year low after a weaker-than-expected manufacturing report added to concern about a deepening slowdown in China, the nation’s biggest trading partner.

The S&P/ASX 200 Index fell 2.1 percent to 4,998.13 at the close in Sydney, the lowest since July 2013. Materials and financial companies led declines by all 10 industry groups, on volume 18 percent below the 30-day average. BHP Billiton Ltd. tumbled 4.4 percent to the lowest since November 2008, while Commonwealth Bank of Australia retreated 3 percent to be the biggest drag on the benchmark measure.

A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, a report showed Wednesday, underscoring the challenges facing the world’s second-biggest economy and the nations such as Australia that supply its factories with iron ore and coal. The S&P/ASX 200 is down 16 percent from its April peak.

“The Australian market is facing a lot of headwinds,” Robert Buckley, a managing partner for Asia at Aviate Global LLP in Hong Kong, said by phone. “As China rebalances its economy to shift into a consumption driven model, that’s going to have a disproportionate impact on raw-material demand. The mining industry is struggling under lower commodity prices.”

Australia’s economy expanded just 0.2 percent in the second quarter from the first three months, and was saved from a contraction only by an uptick in defense spending. The central bank has said the country’s potential growth rate may have fallen, while China’s slowdown and financial market volatility have increased risks to the economies of major trading partners.