Australian shares have had their worst year since 2011 amid fresh evidence of a tightening credit squeeze at home and growing concern about a weakening global economy.
The benchmark ASX200 index finished lower on the last day of the year after a late dive on the share market, confirming 2018 as the worst 12 months for the bourse since 2011.
The S&P/ASX200 index closed down 7.9 points, or 0.14%, at 5645.0 at an earlier-than-usual close of 2pm AEDT on Monday. The broader All Ordinaries closed 6.6 points lower at 5715.0, or 0.12% down, having also been higher throughout the day.
The ASX has slipped 9.04% since September – the worst quarter since September 2011 – and 2018 was its worst year in seven, down 6.9% amid wider global volatility.
The Australian dollar edged higher, buying US70.62c, up from 70.48c on Friday.
Figures from the Reserve Bank on Monday showed a renewed credit squeeze across the Australian economy.
For the year ending in November, broad money – the widest definition of the money in circulation – grew just 1.8% compared with 6% to the year ending in November 2017. Personal credit and housing credit were also lower.
Credit growth in Australia is set to ease further in 2019 based on the ongoing weakness in new lending activity in the housing market. This points to further falls, and larger monthly falls, in property prices #ausproperty pic.twitter.com/1xPJVIAqzj
— Callam Pickering (@CallamPickering) December 31, 2018
The prospect of falling house prices and further pressure on bank shares as the royal commission prepares to reveal its final report into the industry will act as additional curbs on domestic prospects.
Ater 10 years of strong growth, especially in the US, world stock markets have been rocked by rises in US interest rates and uncertainty caused by the US-China trade dispute.
There are also fears that the Chinese economy is heading for a downturn, underlined by figures on Monday showing that the manufacturing sector contracted last month, for the first time since 2016.
#China’s manufacturing activities contracted for first time since July 2016
— YUAN TALKS (@YuanTalks) December 31, 2018
Export and import activities both slipped deeper into the contraction zone;
Construction activities picked up significantly following China's infrastructure pushhttps://t.co/rw92xQs8hU
Naka Matsuzawa, the chief Japan rates strategist at the investment bank Nomura, said in a note that the global economy was on an “irreversible path to an economic downturn” as it worked through the last cycle of the post-crisis expansion in credit.
“However, we do not expect the economy to fall suddenly into a downturn, but to recover temporarily in the second half of 2019 to the first half of 2020 after signs of a slowdown strengthen through the first half of 2019,” he said.
Chris Weston, the head of research at Pepperstone in Melbourne, said fears over global growth and manufacturing loomed as one of the major concerns heading into 2019.
“Liquidity had been sucked out of markets because of downright pessimism,” he said. “At the heart of it is US and Sino relations – Donald Trump would be rubbing his hands together at [China manufacturing data] because he’s got some leverage now.”
The Chinese stock market has been the worst performer of the year across the region, losing a quarter of its value. The only major market in the black for the year was India, where the BSE was ahead by almost 6%.
