By Ross Kelly
SYDNEY--Australian stocks slumped 1.4% Thursday after rising
global bond yields diminished the appeal of dividend plays, putting
the market on track for its worst weekly performance in three
years.
"There is no denying that things are looking a little ugly out
there right now and the banks are right at the heart of it," said
Chris Weston, Melbourne-based chief markets strategist at IG.
Defying overnight gains on U.S. and European stock exchanges,
the S&P/ASX 200 index lost 79.3 points to 5504.3, its fourth
straight daily fall, bringing losses for the week to 4.7%. The
previous time Australia's benchmark index fell that far in one week
was the five-day trading period ending May 16, 2012, when shares
tumbled 5.6%.
This week's lackluster performance might indicate a global bond
selloff is turning investors off Australian dividend plays such as
banks, real-estate investment trusts and utilities.
Bond yields are increasing amid signs Greece's debt woes can be
alleviated and that U.S. interest rates will rise as anticipated
later this year. Yields move inversely to prices.
"The draining of global liquidity will continue to affect all
asset prices, with high-yielding Australian shares particularly
vulnerable," said Michael McCarthy, a Sydney-based trader at CMC
Markets.
Local sentiment wasn't helped by the release of
worse-than-expected retail sales and national-account figures
earlier Thursday, although much of the share-market damage had
already been done before the data were out.
Australia's trade deficit more than tripled in April to 3.9
billion Australian dollars (US$3.04 billion), wider than
expectations of A$2.1 billion, as the value of resource exports
fell sharply, eclipsing a rise in imports of capital goods. Retail
sales, meanwhile, were unchanged in April from March, worse than
the 0.3% increase economists were expecting.
Until recently, Australia's market was buoyed by the strength of
its banks, which offered reliable dividend yields in a low
interest-rate environment. A subsequent upsurge in bond yields has
taken a heavy toll on banking stocks, with Westpac Banking Corp.
(WBC.AU) the hardest hit.
Westpac shares fell 1.5%, placing them 22% lower since a
mid-April peak. Commonwealth Bank of Australia (CBA.AU), the
biggest stock on the exchange, fell 1.3%. Australia & New
Zealand Banking Group Ltd. (ANZ.AU) and National Australia Bank
Ltd. (NAB.AU) fell 1.3% and 2.1%, respectively.
Mining stocks, languishing as a long resources boom fades,
didn't fair any better Thursday, with BHP Billiton Ltd. (BHP.AU)
shedding 1.5% and Rio Tinto Ltd. (RIO.AU) dropping 1.3%.
Grocery wholesaler Metcash Ltd. (MTS.AU) plunged 18% after it
scrapped its dividend and took a A$640 million (US$498.4 million)
impairment charge, as a price war in the industry intensifies.
Write to Ross Kelly at ross.kelly@wsj.com
