The Australian share market has been dragged lower by the big four banks after UBS downgraded Westpac in a report that questioned the quality of the lender’s mortgage book.
The benchmark S&P/ASX200 index dropped 10.8 points, or 0.18 per cent, to 5,910.8 points, while the broader All Ordinaries index shed 6.4 points, or 0.11 per cent, to 6,003 points.
Phillip Capital senior client adviser Michael Heffernan said a report released by UBS, based on documents released by the financial services royal commission, cast doubt on the quality of Westpac’s mortgage book, downgraded the lender’s stock to “sell”, and triggered further anxieties around a financial sector under intensifying scrutiny.
“You can trace the origins of this performance in the suggestion that Westpac’s loan books are under stress, that’s caused the infection for the whole banking sector,” Mr Heffernan said.
“There’s no question that the royal commission is increasing investor nervousness.”
Westpac shares dropped $1.05, or 3.6 per cent, to $28.15, their lowest level since February 2016.
ANZ shed 2.1 per cent to $26.57, National Australia Bank dropped 2.1 per cent to $28.47 and Commonwealth Bank was 1.7 per cent lower at $72.25.
The banking regulator has also lifted a cap on new lending to property investors, and said it expects lenders to put in place restrictions that focus on a borrower’s debt-to-income ratio.
Tribeca Investment Partners deputy portfolio manager Jun Bei Liu said this will make the banks’ lending requirements more stringent.
Rising oil prices boosted local producers, with Origin Energy up 2.5 per cent at $9.49, Woodside Petroleum up 1.2 per cent at $32.17 and Oil Search one per cent higher at $7.89.
Rio Tinto shed 0.2 per cent to $79.40, BHP was down 0.8 per cent at $31.03 and Fortescue Metals dropped 1.8 per cent to $4.49.
Shares in building products supplier Boral continued to fall after its weaker-than-expected trading update on Tuesday, shedding 5.2 per cent to $6.52.
Blood plasma product maker CSL led gains among healthcare players, up 2.4 per cent to $165.65.
Coles owner Wesfarmers reversed early falls to gain 0.6 per cent to $43.13, as it reported a sharp fall in third quarter sales at its struggling Bunnings business in the UK and Ireland, while sales growth at Coles picked up slightly.
Woolworths gained 1.4 per cent to $27.41.
ON THE ASX:
* The benchmark S&P/ASX200 was down 10.8 points, or 0.18 per cent, at 5,910.8 points
* The broader All Ordinaries index was down 6.4 points, or 0.11 per cent, at 6,003 points
* The SPI200 futures contract was up 27 points, or 0.46 per cent, at 5,895 points
* National turnover was 3.3 bllion securities traded worth $7.9 billion
CURRENCY SNAPSHOT AT 1700 AEST:
One Australian dollar buys:
* 75.72 US cents, from 75.98 US cents on Tuesday
* 82.76 Japanese yen, from 82.70 yen
* 62.19 euro cents, from 62.25 euro cents
* 54.32 British pence, from 54.54 pence
* 107.24 NZ cents, from 106.91 NZ cents
The spot price of gold in Sydney at 1700 AEST was $US1,324.79 per fine ounce, from $US1,326.23 per fine ounce on Tuesday.
BOND SNAPSHOT AT 1630 AEST:
* CGS 5.75 per cent May 2021, 2.2487pct, from 2.2376pct on Tuesday
* CGS 2.25pct May 2028, 2.8689pct, from 2.8396pct
Sydney Futures Exchange prices:
* June 2018 10-year bond futures contract was 97.12 (implying a yield of 2.88pct), from 97.145 (2.855pct) on Tuesday
* June 2018 3-year bond futures contract was 97.71 (2.29pct), from 97.72 (2.28pct)
* Australian markets were closed on Wednesday for the Anzac Day public holiday
(*Bond market closes taken at 1630 AEST previous local session; currency closes taken from 1700 AEST previous local session)