Yuan devaluation boosts Chinese shares, hurts other markets
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HONG KONG (AFP) - 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 per cent, 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 per cent 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.
