The performance of Australia’s equity market has not been impressive this year. The S&P/ASX 200 index has fallen by around 9% this year, from trading at the levels of AUD 6061.30 as on January 2, 2018. The index slipped for a third straight session today, closing 0.7 percent down at AUD 5,467.8.
The financial sector has also demonstrated disappointing performance over the year. This is reflected in the negative YTD return of 17.80% (as on December 20 2018) by the S&P/ASX 200 Financial Index (XFJ). The benchmark index has fallen by around 14% over last three months, closing at AUD 5302.6 today, down by 64.3 points. One of the major contributors to this is the dismal performance of banking sector stocks. It has been a disappointing year of trade for Australia’s big four banks.
The stock of Commonwealth Bank of Australia (ASX: CBA) has witnessed a drastic fall of around 14% this year with AUD 80.22 price at 2018 beginning. The stock closed at 0.7% down today at AUD 68.48.
The shares of Australia and New Zealand Banking Group Ltd (ASX: ANZ) reflects year to date decline of -17.60%. A fall of 1.06% (at AUD 23.3) is reported for the bank’s stock at the close of trading session today.
The scrip price of National Australia Bank Ltd (ASX: NAB) has been on a downtrend this year falling from AUD 29.57 (as on January 2, 2018) to AUD 22.84 (as on December 21, 2018).
The shares of Westpac Banking Corporation (ASX: WBC) are trading on the downside this year falling by almost 23% with the current market price of AUD 23.83 as on 21 December 2018.
The stocks of big four banks continue to face the heat owing to surprisingly disappointing findings from a Royal Commission inquiry into financial sector misconduct. With certain findings from the Royal Commission yet to be handed down, the stock performance is still in the spotlight. Some sort of volatility is expected in the banking sector stocks until the Royal Commission final report is released in February.
Meanwhile, nation’s major banks ANZ, NAB and WBC all suffered from historic first strikes (more than 25% shareholder casting a negative vote) against executive bonus plans and pay structure at their recently held annual general meetings. Around 88 per cent of shareholders at NAB and 34 percent at ANZ opposed the bank’s remuneration plans. Westpac saw 64.2 percent of the investor votes casted against the remuneration report.
There are numerous other reasons as well behind these shares trading around their 52-week lows.
These include housing market downturn in Melbourne and Sydney and four times interest rate hike by US Fed this year. In addition, the Reserve Bank of New Zealand is looking into increasing its current tier 1 minimum capital ratio. Even the China-US trade tensions have kept investors away from riskier bank assets over the past couple of months.
Investors may want to keep a close eye over the bank stocks and utilize prudent judgement while making financial decisions. Having said this, the major four still are expected to display long term potential, as also demonstrated through the decent financial performances despite the bleak industry outlook.
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