Australian stocks fell to the lowest level in a week as the largest banks were sold off.
Australia’s four major banks, which make up more than a quarter of the benchmark S&P/ASX200 index weightage, sunk with all of them at an almost two-week low.
The ASX200 financials index finished down 1.9%, leading the broader ASX200 0.98% lower to a close of 5892.30.
ANZ, which reported earnings Tuesday, led losses, fell as much as 2.9% before closing 2.79% lower. The bank posted a fall in net interest margins and revenue though profits increased on cost cuts.
National Australia Bank posts earnings Thursday and Westpac banking Corp reveals its half-year profit on Monday.
Here’s a chart of NAB’s share price today, showing the sustained sell-off. NAB shares closed 2.71% lower.
Share prices for other major banks followed a similar pattern of steady falls during the trading day.
James Whelan, investment manager at VFS Group, a Sydney-based wealth services company with $250 million under management, warned that NAB’s half-year results tomorrow could be a catalyst for further selling if they show similar earnings weakness to that seen from ANZ.
“We’re putting the big 4 on notice. We’re generally bullish this market and don’t want to be reacting too viciously to a little selling, however so tomorrow will decide if we’re cutting or adding to shorts on banks,” Whelan said.
He said VFS would be paying “close attention to NAB tomorrow morning and if it’s bad news then we should see a follow through on selling.”
The selling was as a result of “concerns that the latest round of results will show two things – the current estimates of growth are too high, and all of the “hollow logs” are empty”. Michael McCarthy, chief markets strategist at CMC Markets Asia Pacific, said. “The selling was “very much targeted at the big four – clear support for regionals and insurers suggest at least some investors are rotating to diversify within the sector.”
Sellers targeted the major banks, as regional lender and insurer Suncorp finished down just 0.28% while QBE Insurance rose 0.78%.
The broader index selling was likely prompted by a lacklustre overnight performance on global bourses, McCarthy added.
Wall Street ended little changed on Tuesday, although auto shares and oil prices got slammed. The Dow finished slightly in the green, while the S&P 500 and the Nasdaq dipped into the red.
Miners lost ground as iron ore dropped. A gauge of iron-ore prices in China was down 1.7 percent.
BHP Billiton closed 2.32% lower while Rio Tinto was down 0.95%.
Shares in telecom company Vocus shares fell sharply after it downgraded revenue and profit forecasts.
Vocus shares closed 27.16% lower at $2.44. The share price has almost halved over the last 12 months.