CANBERRA: The Australian share market has retreated for a sixth straight session, with banks driving the losses after Westpac became the latest major to post solid yet unspectacular results amid tightening operating environments in the sector.
At the 4.15pm (AEDT) official market close, the benchmark S & P/ASX200 index was down 73.6 points, or 1.4 per cent, to 5165.8, while the broader All Ordinaries fell 67.4 points, or 1.27 per cent, to 5221.2.
IG market analyst Angus Nicholson said despite profits “by-and-large” holding up, investors still had lingering concerns about the big banks.
“Growing bad and doubtful debts, contracting margins and slowing housing growth all cloud the outlook for the banks’ results in FY16, with the heady profits of the past five years looking unlikely to return,” he said.
Westpac delivered a modest 3 per cent lift in full-year cash earnings, buoyed by the strength of its Australian retail and business banking operations, and said the outlook for the economy remains positive. But chief Brian Hartzer also said the sector faced a period of modest credit growth, intense competition and some ongoing regulatory uncertainty.
A KPMG report said that while the big four’s combined cash earnings grew 5.4 per cent in fiscal 2015, return on equity fell from15.5 per cent to 15 per cent. The accountancy firm warned the downward trend was likely to continue amid tightening capital level requirements.
Meanwhile, Mr Nicholson said another blue-chip stock, Telstra, had endured a difficult day. “Investors have not welcomed news that profits are likely to be impacted over the next few years as Telstra invests in fighting off competitors and financing speculative investments in Asia,” he said.
In economic news, the Australian Bureau of Statistics data found the trend rate of building approvals had fallen for a seventh straight month, although there had been a better-than-expected jump in September approvals, while Australian Industry Group figures showed a slowing of manufacturing activity in October.
Overseas, Caixin’s unofficial China manufacturing purchasing managers index came in ahead of expectations, showing the level of contraction in the sector slowed in October, lifting from 47.2 to 48.3. The result followed the official weekend read of 49.8, which was unchanged.
The market had initially ticked up at the open on weekend data and market leads, which had included a long-awaited rally in iron ore prices, but another drop in copper prices. Financials led the market lower, down 1.91 per cent overall as Westpac shares fell 2.45 per cent to $30.61.
National Australia Bank retreated 1.76 per cent to $29.62, ANZ shares slipped 2.32 per cent to $26.58 while Commonwealth Bank fell 2.12 per cent to $75.10.
Materials were off 0.83 per cent. BHP Billiton was down 0.96 per cent to $22.80 while Rio Tinto lost 0.22 per cent to $50.76. Metgasco was up 6.25 per cent to 5.1c after it was revealed the NSW Government would buy its North Coast coal-seam gas mining licences for $25m.
In the consumer staples sector — which was down 1.4 per cent — Woolworths was off 2.12 per cent at $23.60 while Wesfarmers fell 1.27 per cent to $38.91. Energy stocks were off 0.49 per cent.
Oil Search lost 0.76 per cent to $7.79, Santos added 1.88 per cent to $5.95 and Woodside ticked down 0.03 per cent to $29.60. Meanwhile, Qantas was off 2.78 per cent at $3.84 while Telstra retreated 1.85 per cent to $5.30.
Elsewhere, REA Group was up 1.75 per cent to $48.87 after revealing plans to buy Malaysian-based iProperty in a deal that could be worth $750m while Australia-Pacific Coal was up 42.86 per cent to 1c on news former mining baron Nathan Tinkler had signed on as chief executive.
Looking ahead, the release of the ISM manufacturing index and Markit purchasing managers index in the US overnight could have bearings on potential Federal Reserve interest rate decisions.
Tomorrow all eyes will be on the Reserve Bank of Australia’s monthly interest rate decision, with the market pricing in a 40 per cent probability of the board making its first cut in six months.
