Article / 30 September 2014 at 8:40 GMT

Australia Market Wrap: Stocks tumble, erasing 2014 gains

Trading Desk / Saxo Capital Markets
  • Aussie banks, mining concerns lead major indexes down
  • Traders continue dumping Lynas shares
  • AUDUSD may have established a double-bottom

By Saxo Capital Markets

The Australian market is aiming for its worst month in more than two years, with its performance mainly dragged down by the selling off of the big four banks and the mining sector. In September, the broader All Ordinaries index lost 349.9 points, or 6.2%, to close the month at 5273.2. 

The benchmark S&P/ASX 200 has plunged 353.9 points, with the big four banks lagging in September trading as the Aussie dollar falls and investors look to wind back yield plays. 

Each of the big four banks have been well under their 200-day moving averages. It seems as if the banks are going through a technical correction, as they have suffered their biggest share price decline since May 2012. The financial sector, however, finished in the green today, up 0.82%

Australia's big banks are withdrawing hefty sums from Sydney equity markets. Photo: iStock

Healthcare has been the best performing sector in September, despite losing 1.2%.
With tapering in the US set to end next month, the market is beginning to think about rising interest rates there and strategies may change from yield plays to stocks with more earnings growth in the near future.

Investors may also look to start playing stocks which benefit from the falling Australian dollar such as usual suspects like Computershare (CPU) and Ramsey Health (RHC).

In brighter news, however, the Australian market finished in the green for the first time in a week, up 28.6 points to 5292.8. The two big gainers today were Recall Holdings (REC) and Tassal Group (TGR) up A$0.58 cents to A$5.60 and A$0.18 to A$3.68 respectively. 

The gain by the market was mainly led by defensive stocks; Telstra finished in the green, up $A0.03 to $A5.30.

The market losers were Lynas (LYC), which fell 6.98% to $A0.08  and Treasury Wines (TWE) which tumbled $0.26 cents to $A4.24. Market sentiment towards LYC seems to be getting worse and worse as it goes through the process of raising funds. 

It seems to be a similar story for TWE on the back of yesterday’s news regarding the rejection of its two takeover offers. The market has not reacted well to this decision, but given that most analysts agree with TWE’s decision and current strategic direction, the fall today was not expected. TWE’s current strategic plan includes cutting overhead, separating commercial from luxury and "masstige" products and investing in premium wine inventories. 

Some analysts believe the transaction failed as there was no key to unlock significant value and rapidly retire debt, or to partially fund the transaction. The recent decision by TWE may seem all too familiar to investors after the turmoil Billabong has experienced over the past few years.

The SPI 200 futures index looked strong from the start of the trading session and closed at 5282, above yesterday’s close. The resistance level is at 5,300 and the next resistance is at 5,335 which represents a 23.6% Fibonacci retracement. 

Hong Kong
Australian investors will follow the Kong Kong protests closely, as aftershocks 
could be felt across the region. Photo: Noppasin / iStock

A break out of the 5,300 level may further confirm the SPI as oversold, marking the beginning of a trend reversal. The updates from the current Hong Kong protests and tomorrow's Australian retail sales need to be taken into account and monitored, as negative news in these areas may restrict any further positive price actions.

AUDUSD made an intraday low at 0.8693 which is 10 pips above yesterdays low of 0.8683. This may act as double bottom from a very short-term perspective, while 0.8700 remains a key support level. The next resistance level is at 0.8800, and failing to break through this level will indicate further continuation of downside pressure.

-- Edited by Michael McKenna

Australia Market Wrap is compiled by the Sydney trading desk at Saxo Capital Markets


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