The Australian share market is trading lower as international investors retreat from the major banks.
“International investors that have been investing in this country for the last three or four years in banks are taking profits and taking it home,” IG market strategist Evan Lucas said.
Mr Lucas said that in recent years investors could buy bank stocks fairly cheaply in a low interest rate environment and get a good yield (return) on that investment.
However, the share prices of the banks had since climbed substantially, so now the yield from those stocks had compressed.
Investors, who previously obtained funds at low interest rates and brought that money to Australia and invested it in high-yield stocks such as banks, were therefore retreating elsewhere.
Mr Lucas said overseas investors in the banks were anticipating a tightening of interest rates and a higher US dollar, which meant that profits made in Australian dollars would be less in US dollar terms when repatriated.
The fall in the major banks outweighed a rise in the resources sector, which benefitted from a lift in commodity prices and reports of a new Chinese economic stimulus plan.
Reports say that the People’s Bank of China is providing $US81.4 billion ($A88.1 billion) in liquidity to China’s five largest banks.
Among the major banks at 1210 AEST, Commonwealth Bank was down 60 cents at $77.59, ANZ lost 44 cents to $31.68, Westpac shed 48 cents to $33.02, and National Australia Bank fell 27 cents to $33.37.
In the resources sector, global miner BHP Billiton rose 24 cents to $35.98, Rio Tinto gained 45 cents to $62.26, while Fortescue Metals firmed six cents to $4.06.
Among other stocks, Solomon Lew’s Premier Investments surged 51 cents to $10.34 after the retail group announced its underlying profit rose 10 per cent.
KEY FACTS
* At 1216 AEST the benchmark S&P/ASX200 index was down 21.8 points, or 0.4 per cent, to 5,423.6 points.
* The broader All Ordinaries index fell 18.5 points, or 0.34 per cent, to 5,427.7 points.
* The September share price index futures contract was 19 points lower at 5,423 points, with 70,995 contracts traded.
* National turnover was 823.8 million securities worth $1.93 billion.
