ASX falls as bank’s shares track worst day since 2008
Australia’s share market is falling for a fourth session as investors push for changes to investment taxes and a massive sell-off in Commonwealth Bank shares following disappointing provisional profits.
The S&P/ASX200 fell 21.7 points at midday, down 0.25 percent to 8,649 points, and the All Ordinaries index fell 15.6 points, or 0.18 percent, to 8,896 points.
Shares in Commonwealth Bank fell more than nine per cent to $155.92 in early trade, heading for its worst day since December 2008 after March quarter profits of $2.7 billion missed expectations.
The result completes a quartet of underwhelming interim results from the big four banks, considered the barometer of the Australian economy.
IG market analyst Tony Sycamore said the capital gains tax cuts, negative guidance and tax reforms on trusts announced in the federal budget were largely in line with expectations, but their effects would be felt across many asset classes.
“They will make long-term investments in both residential property and stocks less tax efficient,” Mr Sycamore said.
“While generous allocation protects existing holders, young Australians and new investors now face a significantly less attractive regime – one of the more heavily taxed CGT frameworks among developed peers.”
Outside of finance, eight of 11 local sectors made gains, including basic materials, with BHP hitting an all-time high of $61.61 a barrel overnight, with BHP hitting its own record overnight, driven by copper prices.
Pure copper plays such as Sandfire Resources and Capstone charge more than six and four percent higher, respectively.
BHP continues to eclipse Commonwealth Bank as Australia’s largest company, with a market capitalization of $312 billion compared to CBA’s valuation of $262 billion.
ASX-listed gold miners are also bullish, with the precious metal hovering near US$4,706 ($A6,500) an ounce.
Energy stocks were slightly better than flat, with modest gains in Santos and Woodside, as oil prices strengthened as US-Iran tensions continued.
While coal producers were generally bullish, uranium producers were mixed as Paladin fell by a tenth after profit growth in the March quarter was not enough to impress investors.
Consumer discretionary shares rebounded two percent after falling in the previous three sessions, with slot machine maker Aristocrat Leisure rising nearly eight percent to $49.49 following a strong first-half update.
IT sector WiseTech fell one per cent as Xero and NextDC stumbled.
Tax reforms in Tuesday night’s budget are likely to make investing in growth stocks and start-ups less attractive to investors, Ebury economist Anthony Malouf said.
“The changes effectively penalize assets experiencing high growth, such as start-ups and high-growth stocks, where earnings significantly outpace inflation, completely unlocking outsized real earnings at marginal rates,” he said.
Mr Malouf said the reforms could reduce risk appetite and broader business investment at the margin.
The Australian dollar is buying 72.43 US cents at 72.12 US cents at 5pm on Tuesday.
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