SYDNEY: A plunge in financial stocks has dragged the Australian sharemarket to its lowest point in seven months, pushing the bourse deeper into correction territory.
Led by the nation’s largest lender, Commonwealth Bank, trading ex-dividend, the banking stocks were doubly hit after global ratings agency Fitch Ratings said the big four banks will likely have to increase capital reserves even further than already planned.
Investors had already sold off the major banks after the lenders all launched recent capital raising plans, driving the stocks down around 20 per cent from their March highs, and were quick to punish the stocks again on the threat of further capital accumulation.
At the 4.15pm (AEST) official market close, the benchmark S&P/ASX200 index was down 64.6 points, or 1.2 per cent, to 5,303.1, while the broader All Ordinaries index had fallen 59.2 points, or 1.1 per cent, to 5,309.4.
The benchmark index is now down by more than 10 per cent from the recent highs around 6,000 points, putting it even further into “official” correction territory, CMC Markets analyst Michael McCarthy said. “Worries about Chinese demand, rising US interest rates and a sluggish Australian economy have investors concerned about share prices,” he said.
But Mr McCarthy sees the plunge as a sign that it’s time to buy. “Perhaps one of the most compelling arguments for the positive longer-term outlook for the share market is the significantly lower levels of the Australian dollar,” Mr McCarthy said.
