Asian equities made further retreats early Wednesday, after the People's Bank of China (PBOC) set the midpoint rate for the yuan at 6.3306 per dollar, 75 points weaker than the previous day's 6.2298 level.
Set prior to the market open, the guidance rate — which marked the weakest level for the currency since October 2012 — sent shockwaves through the region's markets.
The Australian dollar fell as much as 1 percent to touch a six-year trough of $0.7216, while its Antipodean peer, the New Zealand dollar, eased 0.6 percent to trade at its lowest since July 1009 against the greenback. Southeast Asian currencies were similarly spooked; the Singapore dollar dropped to a fresh five-year low of 1.4149, while the Indonesian rupiah and Malaysian ringgit hit fresh lows unseen since the Asian Financial Crisis (AFC) in 1998.
Also weighing on sentiment was a negative handover from Wall Street overnight, where major U.S. indices lost their footing as the unexpected weakening of the yuan took a toll on commodity-related shares and fueled worries about global growth. The blue-chip Dow and Nasdaq Composite dropped 1.21 and 1.27 percent, respectively, while the S&P 500 lost 0.96 percent Tuesday.
The Chinese central bank took investors around the world by surprise early Tuesday when it implemented what it said was a one-time yuan depreciation of nearly 2 percent, causing the currency to suffer its biggest fall in over two decades.
Meanwhile, traders in the region may also turn their attention to a flurry of data releases from the world's second-biggest economy around 1.30pm local time.
China's retail sales likely held steady from June's 10.6 percent rise, according to a poll by Reuters, while government industrial output figures for July are seen advancing 6.6 percent, slightly below the 6.8 percent increase in the preceding month. Fixed asset investment for the same month probably rose 11.5 percent from the year-earlier period, above July's gain of 11.4 percent, the Reuters poll showed.
Later in the day, India, Asia's third-largest economy, releases June industrial production and July inflation data.
Mainland markets down
China's Shanghai Composite index crept back to the flatline in early trade, after opening down 0.9 percent to 3,886 points.
According to a Reuters report, the PBOC's decision to allow the yuan to fall for a second day sparked concerns that a currency devaluation would make Chinese shares less attractive.
Among decliners, Chinese carriers including the likes of China Eastern Airlines and China Southern Airlines slumped nearly 6 percent each on the back of worries that a weaker yuan could increase the borrowing costs and the fuel bills of Chinese carriers.
Other indexes in the mainland were off to a softer start as well; the blue chip CSI300 index clawed back losses to trade flat, while the Shenzhen Composite rebounded 0.2 percent.
However, Hong Kong's Hang Seng index plunged 1 percent.
Nikkei skids 1.2%
Japan's Nikkei 225 widened losses to a near one-week low by mid-morning trade.
Stocks with significant exposure to China such as construction equipment maker Komatsu and Hitachi Construction Machinery tumbled 3.4 and 2.8 percent, respectively. Steelmakers also extended losses, with JFE Holdings and Japan Steelworks plunging 4.4 and 3.5 percent, respectively.
Oil-related plays such as JX Holdings and Showa Shell Sekiyu lost 1.7 and 2.4 percent, respectively, as US oil prices hover near six-year lows.
A strong quarterly report insulated Seiko Holdings from the sell-off. Shares of the watch maker rallied 6.5 percent early Wednesday.
ASX drops 0.6%
Australian shares dropped to a more than one-month low as the energy and resources sectors, which make up over 30 percent of the S&P/ASX 200 index, declined on the back of a rout in commodity prices.
Santos and Woodside Petroleum eased more than 2 percent each, while index heavyweights BHP Billiton and Rio Tinto lost 3.4 and 5 percent, respectively.
However, advances among the gold plays offset some of the downward pressure. Evolution Mining and Kingsgate Consolidated bounced up 3.9 and 3 percent, respectively, as the price of the precious metal touched a three-week high overnight.
Before the market open, Commonwealth Bank of Australia announced a 5 billion Australian dollar ($3.65 billion) rights issue to boost capital in response to regulatory pressure. Earlier, the lender delivered a 5 percent rise in full-year cash profit to A$9.14 billion, from A$8.68 billion a year earlier. Shares of the country's second-biggest lender are in a trading halt.
Following the announcement, other major lenders traded mixed. Westpac notched up 0.7 percent, while Australia and New Zealand Banking and National Australia Bank nursed modest losses.
Among other companies releasing their corporate earnings, gaming firm Echo Entertainment tanked 2.1 percent despite delivering a 59 percent rise in full-year net profit.
Kospi slumps 1.2%
South Korea's Kospi index edged down to its lowest level since February 17, while the won lost more than 1 percent of its value against the greenback to hit a fresh four-year trough of 1,190.
Among early-trade laggards, heavyweight steelmaker Posco lost 1.6 percent, while China-exposed plays in the retail and consumer discretionary sectors were battered. AmorePacific and LG Household & Healthcare plunged 8.2 and 6.6 percent, respectively, while Shinsegae and E-Mart skidded 4.8 and 2.3 percent, respectively.
Meanwhile, shares of Daewoo Shipbuilding and Marine Engineering narrowed gains to 2.4 percent on the back of news that the money-losing shipbuilder is planning job cuts and pay reductions.
Lotte Shopping jumped 6.3 percent, as investors cheered news that the company will simplify its shareholding structure and list its hotel unit.
Also bucking the downtrend, Hyundai Motor and Kia Motors elevated more than 5 percent each, buoyed by news that their subcompact cars were the top two best-selling vehicles in Russia last month.
Rest of Asia
Stock markets in Southeast Asia remained on the back foot Wednesday.
Singapore's benchmark Straits Times index and Indonesia's Jakarta Composite plunged more than 2 percent to hit new lows since 2014, while Malaysia's benchmark FTSE Bursa Malaysia KLCI index sold off nearly 1 percent to touch its lowest since April 2013.