Australian shares hit by iron ore slump and bank slide
A fresh five-year low for iron ore prices and steep slide for the major banks have pulled the share market sharply lower.
Starting with modest losses, the Australian share market accelerated further into the red as the day wore on, before gaining just a little ground back in the last hour.
The benchmark ASX 200 index finished down 1.3 per cent at 5,363, while the All Ordinaries was down the same percentage, losing 69 points to 5,368.
The market was on trade for its worst one-day loss in six months, but finished with its worst loss since early August.
IG Markets institutional trader Chris Weston says overseas shareholders are likely to be actively behind the falls, with many seeking to sell Australian investments before the local currency falls any further.
"Foreign investors are scared to hell of holding anything that has Australian dollar exposure," he said.
Mr Weston says around 43 per cent of Australian shares are foreign owned, and those investors have taken big losses from a declining local market, which has slipped more than 5 per cent so far this month, as well as a recent 5 US cent slide in the Aussie dollar.
China, housing worries
The mining sector has been leading the losses, with iron ore miners particularly hard hit after the most widely watched Tianjin Chinese spot price fell to a fresh five-year low of $US81.70 a tonne on Friday.
Fortescue Metals, specialising totally in iron ore and shipping to China, was the hardest hit of the large players, slumping 4.8 per cent to $3.58.
Small miner Atlas was off 5.4 per cent, while the biggest players had slightly less dramatic falls: Rio Tinto was down 2.5 per cent to $60.05; while BHP Billiton was down 1.75 per cent to $34.86, as it is more diversified with significant interests beyond iron ore.
It has not just been the miners dragging on the market though, with the four major banks all deeply in the red.
Mr Weston says those falls have been driven by the prospect of higher interest rates in the US, and increasing international concerns about the sustainability of Australia's rapidly appreciating housing market.
"The fast money has been coming out of the banks," Mr Weston said.
He adds that this will probably be followed by institutional investors and then retail investors selling out.
NAB's 2.4 per cent fall led the losses, with Westpac and ANZ not far behind with 2.3 and 2.2 per cent declines respectively, and the Commonwealth Bank shedding 1.75 per cent to $76.45.
Investment bank Macquarie had a smaller 0.9 per cent slide to $57.90.
Most other stocks were also in the red, but the more defensive healthcare, utilities and consumer staples sectors were less savagely sold down, while consumer discretionary stocks (such as retail and media) also held up comparatively well.
Supermarket giants Wesfarmers and Woolworths were off 0.7 and 0.8 per cent respectively.
Telstra was down 1.1 per cent, while CSL was off a mere 0.1 per cent.
The Australian dollar remains firmly stuck below 90 US cents after a steep fall last week - it fell again late in the afternoon to 89.07 US cents.
Many analysts are now forecasting further falls in the dollar by mid-2015, with some measures indicating it could drop into the 70s.
