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ASX financial sector

Discussion in 'ASX Stock Chat' started by sileverback, Apr 9, 2019.

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  1. sileverback

    sileverback

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    Hi
    not sure if this is the right forum but...
    Hoping someone can fill me in on the current finsector weakness which is in contrast to materials and health sectors which have been quite strong. Recently it seems it was affected by the us inversion of the yield curve but that seems to have resolved itself at least for the short term. The sector turned down on april 1st and has not as yet showed signs of reversing up.
    Thanks
     
    Garpal Gumnut likes this.
  2. greggles

    greggles I'll be back!

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    It's down in April but but not by that much.

    I think it's being weighed down by bank stocks, which all seem to have had a bad start this month.
     
  3. peter2

    peter2

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    Banks are not in demand atm because they're working through their systems that were woefully exposed in the recent (2018) Royal Commission. They've tightened their lending criteria, fewer loans. Real estate prices are falling, fewer loans. The current low interest rates have kept their margins thin and it's been like this for years. The Aussie economy is barely growing.

    At some time in the future, all this will be sorted and the banks will be back in demand. Keep your eye on the charts.
     
  4. kahuna1

    kahuna1

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    Hi,

    well ... the banks are the go to guy for tax. That some of the things that are being planned they pay for is a joke. hence the weakness.

    That added to the weak housing market, our banks struggle despite quite decent profits. Added to their woes is increased capital and likely removal of dividend franking so some exit's ... via those old rich people with excess credits.

    I do feel we are low interest rates for a very long time, so even if they need to reduce dividends and increase capital ... from here to about 10% lower is cheap.

    Outside banks, things like CGF, Challenger, missed totally its targets, looks lie a mess and as such a lot with similar stories and vastly DOWN on the year.

    Conversely, say Platinum who shot its load as a fund manager compared to MFG, Magellan ... one just keeps getting more and more funds under management and went to a 90% plus payout since they have enough cash .... so the share is up over 50% ... Platinum is down 40%.

    So we have things all over the place.

    Smaller banks, well BOQ is having very bigg issues ... even smaller ones ... likely to hit issues and ABA and MYS ... likely any change in the breeze and they shed 20% even more.

    BEN .... Bendigo whilst not so small ... its also having some serious issues pretty much across the board and what looks like a good dividend not so long ago when the idiots took it up over $11- even KNOWING there was stink all over the future, even here at say $9.80, there is still the smell of stink.

    If I were buying, and yep I am, slowly after exiting not so long ago 3,4,5% higher for the big 4 .... its just getting back to better value given its likely most shed a bit on dividends and do so to pay for Royal Commission issues. If Labor gets in, its stupid ... idiotic plan to make banks pay for Women who have been the victim of violence ... and i say this with respect to them ... NO EXCUSE for that ... but what the hell banks have to do with this topic is ... IDIOTIC.

    All in all ... a bag of worms ... but es well spotted. IF the banks were to be even close to recent highs of the last 12 months, let alone the last 3 years, .... they would be 20% higher .... just on the last 12 months and 40% higher ... if it were 3 years.

    Take a deep breath ... and accept the rates stay at 1.5% for some time. I can and do accept a 6% or 7% dividend every day when cash is going to remain at 1.5% for the next 2-3 years I suspect with a very high conviction that this occurs.

    If ... the banks ... were higher ... the ASX 200 would not be playing with 6,200 but post GFC highs above even I suspect the pre GFC high of 6,850 or so. This despite post GFC our commercial property sector got hung out to dry and some stupid sectors ... pre GFC on fire ... Uranium and the likes of Palladin at $10- verses 15 cents now took about 600 points off the index alone. On top of this, commodity side oil was hitting $100- and BHP hit $50- .... oh and Iron ore was on fire .... NOT in AUD terms but the market went a lot nuts pre GFC for Iron ore and FMG ... Fortescue for example which I hated up near $10- went all the way I think to $1.75 and now back up to $6- ....

    All in alll ... financial side a tale very much of two cities with a few winners, not many ... and a lot of loosers and the banks, hit by special taxes and Royal commission stuff and likely a few more costs, got smashed and likely maybe a bit further. For now, big banks entering value ... smaller ones need a fall of 5% or so to enter ... that envelope given their smaller capacity to weather a storm and risk.
     
    Last edited: Apr 9, 2019
  5. Toyota Lexcen

    Toyota Lexcen

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    They are being over regulated by government sectors. APRA basically destroyed the aus economy.

    Not one criminal charge as yet out of RC.

    Other sectors doing well are not being regulated. Mining tax? Look at the mining profits.

    Can't see it clearing up for 10yrs at a minimum. This is what everybody wanted.
     
  6. sileverback

    sileverback

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    Thanks v much for your replies. They are helpful because you are all across the sector down to the individual stocks. I should have mentioned (maybe there's a place my profile) that I trade ASX200 options. The finsector is the prime mover but at times the materials and health can outgun it. Like yesterday, mat and hea (should I be using XJ?? instead for clarity here) had strong days and were able to push the index up in spite of a -0.3pc fall in Fin.
    Getting across the short term factors affecting the sector is useful. For example, when the US bond yield curve inversion was in the news over a week ago, it coincided with a fall in the finsector. (I haven't thought through why this would be). When it resolved, the sector recovered until april 01 when it dived again. (US bonds were still right-way up so wouldn't have been a factor). So, the reason for the post was I was wondering if there was another short term factor driving it down.
    Or course this is happening on top of the factors you guys have mentioned - that the sector is in a period of finding a new equilibrium in doing business after recent industry ructions, with the economic factors like interest rates pushing and pulling the market about in the short and medium term.
     
  7. peter2

    peter2

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    All eyes will be on the BOQ report coming soon. As kahuna1 has mentioned, there is a possibility of a cut in the bank divs. BOQ soon, NAB next month.

    Sector rotation. Money chases the sector with the most promising outlook. Currently its materials (iron ore specifically) and oil. Next week it may be gold again. Who knows.
     
  8. So_Cynical

    So_Cynical The Contrarian Averager

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    Been tanking for a solid 7 or 8 months depending on where you're looking, i mostly look as the smaller caps and the sell off has been significant, some deep value presenting and i like financials in general.
     
  9. sileverback

    sileverback

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    There might be an explanation for the short term move in the news this morning. "New Zealand's central bank has proposed an increase to the amount of capital banks must hold and analysts have warned it will have a material impact on the Australian banks."
    Read the article
    https://mobile.abc.net.au/news/2019...d-be-hit-by-nz-requirements-analysts/10987852
    Maybe there has been some inkling of this around since the beginning of April.
     
  10. Toyota Lexcen

    Toyota Lexcen

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    Are there risky loans? Court doesn't think so
     
  11. kahuna1

    kahuna1

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    BOQ ...

    as expected YUK ... stock already hit as they announced it was having issues. Down another 5% and dragging others with likely similar issues along for the ride.

    All this said, as with the previous post, big banks for me at least, right or wrong ... entered the upper edges of where I saw value and the next 3-5% would be perfect to get set at least for me. I have no issue with dividend franking ...

    No issue with knowing they are needing to retain more capital for reserves. Well aware of weak property side ... all this is already priced or so I think. I may NOT ... if it becomes a rout ...

    Smaller they are, the more they need to shed to enter what I perceive as a value envelope. BEN, Bendigo as I mentions has fleas as well ... the rest of the smaller ones have fleas and ticks and BOQ is so far off its 12 month highs, it makes the risk reward ratio much better in terms of value.

    Slowly slowly is I suppose the way to go. Election announced just to add mayhem to madness and its not a GOOD one either for stocks.
     
  12. MARKETWINNER

    MARKETWINNER

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