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Regularly updated information, news, current affairs, advice & tips relating to online binary index or options trading on intraday markets from the World's No.1 Index Trading Alert Provider.

Banking Stocks Traded Lower as State Gov. Announced New Tax on Big Banks

Australian Markets traded sideways today. The S&P/ASX 200 edged higher by 0.06%, buoyed by gains in its health care and telecommunications sub indexes which were up 1.03% and 1.25% respectively. Australian financials remained under pressure, with the sub-index edging lower by 0.58%.

Banking stocks traded mostly lower after the South Australia government announced a new tax on the nations big banks. Shares of ANZ declined 0.93% and NAB fell 0.95%. Westpac gave up earlier gains to trade 0.05% lower.

 

Losses in the banks were higher in the first minutes of trade, showing that the reaction may be overdone. The overall impact of the tax on the banks earnings is likely to be negligible but investors are worried about the possibility of other states introducing similar taxes.

In general terms this serves as a reminder that Australian shareholders generally and bank shareholders in particular, are in a period of heightened political risk that needs to be factored into investment decisions.  

The Australian dollar is hovering near more than a week lows at 75.53 cents in four straight sessions. It has also been pressured by an interest rate hike in the United States this month, while the RBA has made it clear it is in nor rush to tighten monetary policy. 

Also narrowed the rate differential between the two to plus 25 basis points, with some traders speculating the spread might turn negative if the US Federal Reserve continues to tighten further. 

 

 

 

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Global Stock Market Latest Update

ASX (5,768.30, +0.09%) is on track for their biggest weekly gain in over two months, led by gains in defensive stocks and financials.

 

Dow (21359.90, -0.07%) was almost stable but has the potential to move up towards 21600 by mid of next week. 

The rise could be eventual and slow but overall near term looks bullish.

 

Dax (12691.81, -0.89%) has come off sharply and while below the important resistance of 13000, there is some scope of re-testing 12500-12400 in the medium term before possibly stating another leg of an upward rally.

Shanghai (3128.27, -0.13%) is also trading lower and could possibly test 3100 before again trying to move up. Immediate trend looks bearish.

 

 

 

Nikkei (19917.73, +0.43%) has the potential to move up towards 20100 in the next 2-3 sessions. Momentum could be slow but an eventual rise is expected while above 19700.

 

Nifty (9578.05, -0.42%) could find some support near 9550-9530 today from where it could bounce back to higher levels in the near term.

Only on a break below 9530, if seen would force us to change our current bullish view on Nifty.

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Asian Markets Update

Japanese Yen rose 0.1 percent to 111.71 per dollar as of 9:17 a.m. in Tokyo, after dropping 0.3 percent on Thursday. Japan’s core consumer prices rose for a fourth month in April, the longest run of gains since mid-2015.

Topix slipped 0.3 percent, while Australia’s S&P/ASX 200 Index fell 0.6 percent. South Korea’s Kospi rose 0.2 percent.

 

Futures on Hong Kong’s Hang Seng Index and those on the FTSE China A50 Index rose 0.1 percent.

West Texas Intermediate crude was flat at $48.90, after sinking 4.8 percent in the previous session.

 

AUD was flat after losing 0.7 percent on Thursday, declining along with the Canadian dollar and the kiwi.

Currencies of countries heavily reliant on commodities as an export all suffered in the wake of the slide in raw materials.

 

 

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Markets And You explains the Attractive Pricing but Under Valued Stocks

Markets And You explains the Attractive Pricing but Under Valued Stocks
The banking sector in Australia could be possibly be described as one that is partially appealing. This is because the valuation and the dividend yields are attractive while on the other hand, the increase in capital requirements, increasing bad debts, and growing margin pressures make the investment in this sector difficult. This attractiveness in pricing which was recently reflected seems inviting to the investors is consequently countered by what was seen in the most recent reporting season. That is, the profit of major banks was tainted by the burden on the earnings projections.
Despite the improvement in the rate of credit growth, the rising funding costs, cut-throat competition and low rate of interests are vastly affecting the margins. The counter action for this among major banks is the loan re-pricing models. Intensive management also is being applied to deliver productivity gains that can help in funding appropriate investments and competitive positioning.
The assessment of the banking segment in comparison to the twelve months forward price-earnings ratio of the other players in the stocks market is about ten-year low. This is quite true despite the fact that the twelve months net dividend yield compared to the bond yield is highest for more than ten years.
It is important to note that during the month of May, investors despite having little expectation experienced some small relief rally. This relief could be attributed to somewhat the timing of the prevailing interest rates at the time that the rates were reduced by the Reserve Bank. This, therefore, highlighted the attractiveness of the banking sector dividend yields.
One should consider the fundamental elements that underlie the investors’ and other players in the stocks market decision-making process. These factors are such as bad debt expense, dividend sustainability, valuation support, margin pressure and capital requirements.
Focusing on the banking segment valuation is somehow supportive on equally the absolute and relative basis to the general market when paralleled to long run metrics. The dividend yield which is about 6.2 percent is more attractive compared to the general market yield which is about 4.5 percent. The high dividend yield provides support to the banking sector particularly if there are any further cuts to the endorsed cash rates. It could also be possible that the banking segment has a favorable industry arrangement that becomes effective in handling of the challenges experienced as well as reacting to the emerging issues which pose challenges.
There is also a rising risk for the banking earnings. Margin pressure has been building up in various areas within the sector. These areas include asset price competition and the rising costs of funding. These observations are clear in an environment that has relatively low growth rates, against a background with low-interest rates and continuous regulatory pressures. Therefore, banks continually re-price their loans upwards to control the margin pressure.
Also, the global capital standards are continuously evolving while the Australian Prudential Regulatory Authority (APRA) has not yet finalized on the banks’ capital requirements. As a result, it’s not possible to tell the amount of additional capital banks may be required to hold to meet the “unquestionably strong” targets hence the reason trading on Binary Options is becoming more appealing to many investors around the world. Markets And You can teach you how to trade online while keeping your risk in the financial markets to a minimum.

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